Suppose you enter into a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Administrative Order to perform remediation where your release of liability is conditioned on successful performance of the remedy to the U.S. Environmental Protection Agency’s satisfaction. You want to recover some of your response costs so you sue other potentially responsible parties. Do you sue under Section 107 of CERCLA for cost recovery with the prospect of joint and several liability, or do you sue under Section 113 for contribution?
The Seventh Circuit addressed this question in its December 19, 2012 decision, in Bernstein v. Bankert, Nos. 11-1501 and 11-1523. We wrote about this decision in our February 21, 2013 blog. Now, following a request for a panel rehearing and consideration of amicus EPA’s concerns,the Seventh Circuit has issued an amended opinion superseding its prior opinion. See July 31, 2013 amended decision. The amended opinion does not alter the substantive outcome of the earlier decision, but is a must read if you are a “CERCLA-hound,” as we are.
We could spend pages discussing the Section 107 v. Section 113 dichotomy, but won’t do so here. The very short version is that according to the Seventh Circuit, there are specific triggers for when a Section 113 contribution claim is available. Either the party must have been subjected to a civil action under CERCLA Sections 106 or 107, or the party must have “resolved” its liability to the United States for some or all of a response action in an administrative or judicially approved settlement. See CERCLA Section 113(f)(1) and 113(f)(3)(B). If either of those triggers have occurred, not only is contribution available, it is the only remedy available. In other words, an action under Section 107 is out of the question.
Responding to amicus EPA’s concerns, the Court’s amended decision acknowledges that a party can resolve its liability at the time that it enters into a settlement with EPA. However, whether the settlement actually resolves the liability is dependent on the language of the settlement. If the settlement only conditionally resolves liability based upon satisfaction of future performance, contribution is not available while performance is taking place.
So does this result discourage a party from entering into an agreed order with EPA because it cannot pursue contribution (or receive contribution protection)? Not at all, according to the Seventh Circuit. Rejecting EPA’s contention, the Court said that a party who is performing under an administrative order where liability is only conditionally resolved still has a remedy — a Section 107 action!
Now you might say to yourself, isn’t a Section 107 action even better than pursuing a Section 113 action? Under Section 107 not only do I get a longer statute of limitation period, but I also get to sue for joint and several liability. Why would I ever want to sue for just my proportional share under Section 113 when I can bludgeon my adversary with the prospect of obtaining all of my response costs under Section 107 (thus avoiding my fair share of liability)?
And now we get to the most interesting part of the amended decision. In response to this musing, the Seventh Circuit states: “the mere fact that the [plaintiffs] seek to impose joint and several liability does not mean they will be successful.” According to the Seventh Circuit, the opportunity for apportionment exists; indeed: “there is not more risk that a defendant could be gamed into shouldering full liability, or more than his fair share, by a plaintiff with a §  cost recovery action than by a plaintiff with a §  contribution action.” Same risk; same outcome. Either statutory provision gets to the same result.
But is this actually so? Let’s take a closer look because we suspect that the Seventh Circuit’s solution to the Bankert case could raise problems in the future. As we know, under the Supreme Court’s ruling in Burlington Northern and Santa Fe Railway Co. v. U.S., 129 S. Ct. 1870 (2009), liability under CERCLA is not always joint and several if a defendant can establish that the harm is divisible. The Seventh Circuit’s holding in Bankert arguably conflates divisibly and apportionment. This may be fine for Section 107 actions brought by one liable party against another, indeed it is the logical outcome, but can this also be enough to defend against an Section 107 claim brought by the Government? If all one needs to establish for divisibility when sued by the Government is that there are multiple parties and a basis for apportionment, then there is little teeth in the threat of joint and several liability.
On closer scrutiny, the prerequisite for defeating joint and several liability as articulated in Burlington Northern is two-fold: first, a finding that the harm is theoretically capable of being divided, which is a question of law; and second, that there is a basis for apportionment, which is a question of fact. The Seventh Circuit appears to either ignore the question of whether the harm is divisible, or implicitly finds that as between two liable parties, the “harm” to evaluate for divisibility is not the harm to the property or to the environment, but instead is only the financial harm that results from performing remediation.
Is this all a tempest in a teapot in actions between liable parties? Maybe. In a fight between liable parties where plaintiff is seeking joint and several liability, if defendant fails to defeat joint and several liability based on divisibility, can it not obtain the same result by pursuing a counter-claim for contribution? Remember, the party performing the remedy under an administrative order with a contingent release of liability also enjoys no more than contingent “contribution protection.” Accordingly, the defendant counter-claims in contribution. If defendant establishes several liability, it pays only its share of liability. If, however, plaintiff prevails on joint and several liability, then defendant is entitled to recover from plaintiff in contribution for sums beyond its proportionate share. Either way, between liable parties under a Section 107 claim, the court ultimately should end up apportioning liability regardless of whether the “harm” is divisible.