Cost Recovery or Contribution? Impacts of Guam on the Timeliness of CERCLA Claims in the Third Circuit and New Jersey
The recently concluded Supreme Court term was an exciting one for environmental lawyers, as the Court in Guam v. United States made a rare foray into interpreting the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), specifically considering the impact of certain settlements on statutes of limitations under CERCLA. As in its 2004 decision in Cooper Industries v. Aviall Services, the Court’s interpretation of CERCLA in Guam differed from the previously prevailing interpretation of most federal circuits. That is, the Court overruled prior decisions of several federal circuits, including the Third Circuit, and held that settlements of liability under environmental laws other than CERCLA do not trigger a contribution claim under CERCLA section 113. In so doing, the Court revived Guam’s $160 million CERCLA claim against the U.S. government, which the lower courts had held to be time barred. For parties conducting cleanups within Third Circuit jurisdictions, Guam gives new life to CERCLA claims that might have been understood to be untimely, and it also has important consequences for parties seeking reimbursement for cleanup costs in New Jersey, particularly those with claims against the federal government.
The Supreme Court case centered on Guam’s Ordot Dump, at which the Navy allegedly deposited hazardous substances before ceding the dump to Guam as a public landfill. The United States Environmental Protection Agency sued Guam under the Clean Water Act for contamination caused by the landfill, which resulted in a 2004 consent decree. Then, in 2017, Guam sued the United States under CERCLA to recover its costs to clean up the landfill. Both the D.C. District Court and the D.C. Circuit dismissed Guam’s claim as untimely. First, the lower courts held that a cost recovery claim under CERCLA section 107 and a contribution claim under CERCLA section 113 are mutually exclusive remedies; that is, if a party could have brought a contribution claim, it cannot bring a cost recovery claim. Second, the 2004 Clean Water Act settlement made Guam a “person who has resolved its liability to the United States … for some or all of a response action or for some or all of the costs of such action in [a] settlement” under CERCLA section 113(f)(3)(B) and thus eligible to bring a CERCLA contribution claim as of 2004. Because the statute of limitations for a CERCLA contribution claim expires three years after a plaintiff enters into a qualifying settlement, Guam’s 2017 lawsuit was untimely.
The Supreme Court disagreed. The Court held that CERCLA contribution requires resolution in a settlement of CERCLA-specific liability, and Guam’s settlement under the Clean Water Act did not qualify.
The most direct consequence of Guam for litigants in Third Circuit jurisdictions is the revival of CERCLA claims that would have been classified as contribution claims and considered untimely. Guam overturns the Third Circuit’s holding in Trinity Industries, Inc. v. Chicago Bridge & Iron Co., 735 F.3d 131 (3d Cir. 2013), that a settlement with a state agency that did not resolve CERCLA liability can trigger a CERCLA contribution claim. After Guam, when these claims are categorized as cost recovery claims under CERCLA section 107, they will be subject to a longer statute of limitations—in most cases, six years following initiation of on-site construction of the remedial action—rather than the shorter statute of limitations for CERCLA contribution claims of three years following the entry into a settlement. The CERCLA contribution/cost recovery distinction is less important for litigants in New Jersey than for those in other states with respect to the timeliness of claims, as the New Jersey Spill Act provides a comparable remedy to CERCLA, and Spill Act claims are not subject to any statute of limitations following the New Jersey Supreme Court’s decision in Morristown Associates v. Grant Oil Co., 220 N.J. 360 (2015).
Nevertheless, parties with claims against the federal government for remediation costs in New Jersey should be particularly cognizant of the CERCLA issues implicated in Guam because the federal government likely has sovereign immunity from Spill Act claims, but not CERCLA claims. For example, the plaintiff in Cranbury Brick Yard, LLC v. United States, 943 F.3d 701 (3d Cir. 2019), lost its $56 million claim for contamination allegedly caused by the military because the claim was held to be a CERCLA contribution claim and, thus, untimely. (Notably, the result in Cranbury Brick Yard would have been the same even under the new Guam rule because the settlement with NJDEP that triggered a CERCLA contribution claim specifically resolved Cranbury Brick Yard’s CERCLA liability to New Jersey.)
The predominant “settlement” of liability for remediation costs in New Jersey is the covenant not to sue from NJDEP that accompanies a response action outcome under N.J.S.A. 58:10B-13.2. Under the Guam framework, the recipient of an RAO likely would have a CERCLA cost recovery, not contribution, claim because the covenant not to sue does not settle a CERCLA-specific liability. And, although Guam concerned whether a settlement triggered a contribution claim under CERCLA section 113(f)(3)(B), its reasoning would apply with equal force to determine whether a settlement grants contribution protection under section 113(f)(2). Thus, the recipient of an RAO likely could not rely on contribution protection from CERCLA claims by other potentially responsible parties. In contrast, the recipient of an RAO does benefit from contribution protection for Spill Act claims. N.J.S.A. 58:10-23.11f.a.(2)(b).
In Guam, the Supreme Court again overturned the CERCLA precedents of several circuits. Parties that have entered or will soon enter settlements with the government of liability for environmental remediation should be aware of the new regime established by Guam.