In United States v. Atlantic Research Corp., Slip. Op. No. 06-562 (June 11, 2007), the U.S. Supreme Court recently resolved a critical issue for anyone facing the remediation of contaminated property: whether a company that “voluntarily” performs a cleanup may recover some or all of its costs under Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA,” often known as “Superfund”), even though it may itself be a liable party under CERCLA. This decision resolves a previous split among the circuit courts involving the Seventh Circuit decision in Metropolitan Water Reclamation District of Greater Chicago v. North American Galvanizing & Coatings, Inc., No. 05-3299 (7th Cir. 2007)(holding that potentially responsible parties [“PRPs”] could recover under Section 107) and the Third Circuit’s contrary decision in E.I. DuPont de Nemours & Co. v. United States, 460 F. 3d 515 (3d Cir. 2006). The Atlantic Research decision adds welcome certainty to parties facing liability for costs associated with the cleanup of contaminated parcels, but also leaves a few questions unanswered that will await further clarifi cation from the high court as CERCLA jurisprudence continues to develop. Most signifi cantly, the decision may have inadvertently opened the door for reduced certainty for parties seeking contribution protection in settlements with the government, as such parties may now be exposed to future lawsuits despite having settled with the government.
In Atlantic Research, the Supreme Court undertook to resolve the issue that it expressly left open in its landmark decision in Cooper Industries v. Aviall Services, Inc., 543 U.S. 157 (2004), which turned two decades of CERCLA jurisprudence on its head. In Aviall, the court held that parties who perform a “voluntary” cleanup, rather than settling with the Environmental Protection Agency (“EPA”) or being sued, have no right to seek contribution under Section 113(f) of CERCLA from other liable parties. 42 U.S.C. § 9613(f).
After Aviall, many parties who had commenced voluntary cleanups, assuming that at least part of the money they expended could be recouped from other PRPs, were left searching for means other than a CERCLA contribution lawsuit to recover some or all of their remediation costs. Parties contemplating voluntary cleanups were suddenly faced with a Hobson’s choice – performing a “voluntary” cleanup with no ability to recover their costs under CERCLA, or waiting for a lawsuit to preserve a contribution claim. Given the stakes at most Superfund sites, the willingness of parties to proactively address contamination was understandably chilled, frustrating CERCLA’s goal of promoting the cleanup of the nation’s most seriously contaminated sites.
While Aviall effectively shut the contribution door under Section 113 for CERCLA-liable “volunteers,” the Supreme Court left open the possibility that liable parties could sue directly under Section 107. Ironically, before Section 113 was added to CERCLA in the 1986 Superfund Amendments and Reauthorization Act (“SARA”), many courts found a private action for cost recovery – either express or implied – directly under Section 107(a). After the express contribution provisions of Section 113 were added to the statute, courts were virtually unanimous in determining that Section 113 had become the exclusive avenue for cost recovery available to PRPs who sought to recover some of their response costs at Superfund sites. Most courts found that Section 107 remained viable as a basis for cost recovery only for claims by the government and by truly “innocent” parties that expended response costs but were not themselves CERCLA-liable parties (a rather diminutive group). In the wake of Aviall, lower courts came full circle and began to reexamine their post-SARA rulings that liable parties could not bring claims under Section 107. Many such courts, even ones that (pre-Aviall) had found no right to contribution under Section 107 (at least for CERCLA-liable parties), began to fi nd that Section 107 did provide a basis for recovery. As noted above, however, not all courts were in agreement on this issue and a split developed at the Circuit Court of Appeals level, which could only be resolved by the Supreme Court.
THE ATLANTIC RESEARCH CASE
The facts in Atlantic Research were fairly typical of CERCLA cost recovery actions. In this case, Atlantic Research Corp. (“ARC”) had leased property at the Shumaker Naval Ammunition Depot, which was a facility operated by the Department of Defense. ARC performed retrofi tting work for rocket motors for the U.S. government and used highpressure water spray to remove pieces of propellant from the motors. The pieces were then burned, which resulted in contamination of soil and groundwater at the site.
ARC voluntarily began a cleanup of the site at its own expense and then sued the U.S. government to recover an equitable portion of such costs. ARC initially brought suit under both CERCLA Section 107(a) and Section 113(f), but amended its complaint to drop the Section 113(f) claim after the Supreme Court’s decision in Aviall, which foreclosed such claims by parties that have not fi rst been sued under a CERCLA Section 106 or Section 107(a) civil action. The amended complaint was dismissed by the district court, which relied on the notion that suits under CERCLA Section 107 were not available to parties that had not fi rst been sued by other private parties or the government. But this decision was reversed by the Eighth Circuit, which joined the Second and Seventh Circuits in holding that Section 113(f) does not provide “the exclusive route by which [PRPs] may recover cleanup costs.” Atlantic Research Corp. v. United States, 459 F.3d 827, 830 (8th Cir. 2006).
The Eighth Circuit rejected the government’s argument that certain language in CERCLA Section 107(a)(4)(B), which excluded suits by “any other person,” served to bar suits by any party listed as a potentially liable party in Section 107(a)(1-4). The government’s interpretation thus would have the effect of foreclosing Section 107 claims to any entity other than a non-liable (“innocent”) party under CERCLA. Rather, the Eighth Circuit held that the “any other person” language most logically related to the preceding subparagraph (A) of Section 107(a)(4), which permit suits only by the United States, a state or an Indian tribe. Thus, the phrase “any other person” excluded suits only by one of the prior-named three parties: the United States, a state or an Indian tribe.
THE SUPREME COURT SPEAKS
The Supreme Court, in a unanimous opinion authored by Justice Clarence Thomas, clearly held that Section 107(a)(4)(B) provided a cause of action to any PRP other than the United States, a state or an Indian tribe, provided that such party had actually incurred costs of response. The court stated that, because statutes must be read “as a whole,” the language in Section 107(a)(4)(B) specifying “any other person” could only be understood in reference to the preceding subparagraph (A), which listed the United States, a state or an Indian tribe. The phrase “any other person” thus means “any person other than those three.” (Slip. Op. at 6.) Therefore, subparagraph (B) allows cost recovery actions by any other party, including PRPs. (Id.) The court noted that, among other reasons, the government’s reading of the statute would virtually eliminate suits by any party, as the net of potential liability cast by the defi nition of PRP in Section 107 is so entangling that it includes “virtually all persons likely to incur cleanup costs.” (Id.)
The court also rejected the government’s argument that allowing suits under Section 107 would unfairly allow PRPs to choose between Section 107 and Section 113, which could circumvent Section 113’s short statute of limitations (three years under Section 113 compared to six years under Sec tion 107). In doing so, the court clarifi ed the distinction between the cause of action for contribution provided under CERCLA Section 113(f) and the cost recovery claim under Section 107.
The court explained that, as it has stated on prior occasions, Section 107 and Section 113 provide two “clearly distinct” remedies. Contribution is authorized under CERCLA “during or following” a suit under Section 106 or 107. 42 U.S.C. § 9613(f)(1). A suit under Section 113(f) is thus allowed before or after the establishment of common liability and, moreover, is “contingent upon an inequitable distribution of common liability among parties.” (Slip. Op. at 9).
In contrast, Section 107 permits a party that incurs response costs to sue for recovery but does not create a right to contribution. Importantly, the court found that Section 107 does not require establishment of liability to a third party before fi ling suit and, thus, even “voluntary” cleanups can be the subject of a Section 107 cost recovery action. The court pointed out, however, that only those costs actually incurred by a party may be recovered, whereas when a party pays to satisfy a settlement agreement or a court judgment, it does not incur its own costs of response. (Id.) Thus, a party that “pays money to satisfy a settlement agreement or a court judgment may pursue Section 113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under Section 107(a).” Thus, because a party cannot simultaneously seek to recover the same expenses under both Section 107 and Section 113, there is no concern with overlapping but inconsistent statutes of limitations.
And, at least in the case of suits for reimbursement of response costs paid by other parties, it is clear that the short three-year limitation period under Section 113 must apply.
While going a long way toward providing clarity and certainty in the realm of CERCLA cost recovery actions, the Atlantic Research decision did leave a few unanswered questions and may have inadvertently opened the door for less certainty in other areas.
For example, the court noted that PRPs may sustain expenses pursuant to a consent decree following a suit under Section 106 or 107(a), in which case the PRP does not incur costs “voluntarily” but does not reimburse the costs of another party, either. (Slip. Op. at 10, fn. 6). The court expressly declined to decide whether these “compelled costs of response are recoverable under Section 113(f), Section 107(a) or both.” (Id.)
In addition, the court noted that the settlement bar set forth in Section 113(f)(2) that provides “contribution protection” for settling parties (which is widely relied upon by PRPs seeking fi nality in their settlements with the government) does not, in fact, protect against suits for cost recovery under Section 107(a). The court notec that a PRP may achieve an eventual equitable apportionment of all liability by fi ling a Section 113(f) counterclaim, but this option may do little to encourage settlements by PRPs with the government when a major incentive for doing so is to insulate the setting parties from any future lawsuits stemming from “matters addressed” in the settlement, as has been widely accepted among CERCLA practitioners for many years.