On Wednesday, August 18, 2021, the U.S. Court of Appeals for the Second Circuit vacated a district court order dismissing claims for violations of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. See Revitalizing Auto Cmtys. Envtl. Response Tr. v. Nat'l Grid USA, No. 20-1931-cv (2d Cir. Aug. 18, 2021). The Court held that the claims, which were brought under sections 107 and 113 of CERCLA, were prudentially ripe because they were based on costs plaintiffs had already incurred for which they might not receive repayment through EPA investigation. Id.
CERCLA has a dual goal of “cleaning up hazardous waste and holding polluters responsible for their actions.” Id. at 21. Section 107(a) and 113(f)(3)(B) of CERCLA authorize parties to recover costs incurred in cleaning up contamination: section 107(a) permits the general recovery of cleanup and prevention costs and section 113(f)(3)(B) creates a contribution right for parties that have resolved their liability by settlement. Id. at 4-5. Plaintiffs-Appellants Revitalizing Auto Communities Environmental Response Trust (“RACER Trust”) and RACER Properties LLC (together, “RACER”) were created pursuant to a 2011 consent decree and settlement agreement during the General Motors Corporation bankruptcy. Id. at 3-4. “RACER was established and funded to clean up pollution at 89 former GM properties across 14 states, including the former GM plant site located in the Onondaga Lake region of New York. Id. RACER had set aside over $31M to cleanup contamination at the Onondaga Lake site. Id. at 9.
In 2015, after RACER began the cleanup, the New York State Department of Environmental Conservation ("NYSDEC") and the EPA asked RACER to extend its cleanup efforts to an area not encompassed by the 2011 agreement. Id. As a result, in 2018, RACER sued several dozen defendants for contribution and cost recovery under §§107(a) and 113(f) of CERCLA. RACER argued that because it has not resolved its liability as to the expanded territory in a judicially approved settlement, its claim should proceed under § 107. Id. at 5. Alternatively, RACER brought a § 113 claim so it could recover if the court found that its liability to clean up the expanded territory was resolved under the 2011 agreement, which would bar it from proceeding under § 107. Id.
The District Court for the Northern District of New York first concluded that RACER Trust lacked capacity to sue and that RACER Trust's trustee, EPLET, must be joined as a plaintiff. Id. at 17. Second, the district court dismissed RACER’s § 107 claim holding that it was “prudentially unripe because the EPA [was] investigating other potentially responsible polluters.” Id. at 6. Prudential ripeness, different from constitutional ripeness, is a very narrow “exception to the usual rule that where jurisdiction exists a federal court must exercise it, and [it] allows a court to determine that the case will be better decided later.” Id. at 22-23. But a “federal court’s ability to decline jurisdiction on prudential ripeness grounds must be reconciled with the virtually unflagging obligation of a court to hear and decide cases within its jurisdiction.” Id. at 27 (citing Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125-26 (2014)).
In dismissing the CERCLA claims, the district court reasoned that it would be “best to allow the EPA to identify other responsible parties and decide on a proper course of action before allowing RACER to pursue other polluters in court…[and] that RACER would not suffer hardship from delay because it could assert defenses in the bankruptcy proceeding if the NYSDEC or EPA required it to clean up territory not encompassed by the 2011 Agreement.” Id. The district court similarly dismissed RACER’s § 113(f) claim as either unripe or time-barred if the 2011 Agreement established RACER's liability to clean up the expanded territory. Id.
At issue on appeal was whether RACER had capacity to sue in its own name, and, more importantly, whether RACER’s §§107(a) and 113(f) claims were prudentially ripe while the EPA was conducting an investigation, which would have potentially identified other polluters of the contamination site. As a threshold procedural matter, the Second Circuit agreed with the district court's conclusion that “in order to proceed, RACER’s trustee must be substituted as plaintiff.” Id. at 17. But in vacating the district court’s dismissal on the merits of RACER’s CERCLA claims the court reasoned that RACER’s claims were prudentially ripe and fit for judicial decision—not premature—because there was “no future contingent event that [was] strictly necessary to resolv[e]the claim.” Id. at 22. The court further reasoned that merely because the EPA stated an intent to pursue other polluters did not ensure that RACER would have the opportunity to recover money it already spent on the expanded cleanup. Id. at 23. Moreover, RACER suffered a “present detriment”—money spent—and the EPA was in the “early stages” of its investigation. Id. Therefore, even setting aside the risk that claims could become time-barred, RACER would suffer a hardship if it were forced to wait for the EPA to conclude its investigation, which could take years, before it could recover costs it already spent. Id. Notably, the Court did not address whether RACER failed to state a claim under 113(f) or if such a claim were time-barred inasmuch as it did not appear that the district court undertook a separate analysis of those issues but rather than is relied on its ripeness determination.
Put simply, regardless of whether the EPA investigation identified other polluters or “whether or not the EPA or the NYSDEC require[d] RACER to continue to remediate the expanded territory, RACER had already spent money that it [was] entitled to attempt to recover” and it would suffer hardship if it were forced to wait to seek recovery. Id. Thus, RACER’s claims under §§107(a) and 113(f) of CERCLA were prudentially ripe for judicial determination.