In a decision important for anyone facing the remediation of contaminated property, the United States Court of Appeals for the Seventh Circuit recently joined the Second and Eighth Circuits in holding that 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. The Seventh Circuit case, Metropolitan Water Reclamation District of Greater Chicago v. North American Galvanizing & Coatings, Inc., No. 05-3299 (7th Cir. 2007), specifi cally declined to follow a contrary holding by the Third Circuit in E. I. DuPont de Nemours & Co. v. United States, 460 F. 3d 515 (3d Cir. 2006). In another recent development, the U.S. Supreme Court has agreed to review the Eighth Circuit’s decision United States v. Atlantic Research Corp., 459 F. 3d 827 (8th Cir. 2006), resolving the split among the Circuits on the issue.
It is fi tting that the Supreme Court 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 Potentially Liable Parties (“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 in order 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 the Aviall court effectively shut the contribution door under Section 113 for CERCLA-liable “volunteers,” the Supreme Court left open the possibility 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) of the statute. 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 themselves 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.
The Seventh Circuit Speaks
The Seventh Circuit is the most recent Court of Appeals to enter the Section 107 fray with its decision in the North American Galvanizing case. The facts in North American Galvanizing were fairly typical of CERCLA cost recovery actions. The Metropolitan Water Reclamation District (“MWRD”) owned a 50-acre parcel of land upon which the defendant’s subsidiary, Lake River Corporation, developed the property with a chemical storage, formulating and packaging facility. In the course of its operations, which included a number of aboveground storage tanks that allegedly were prone to leakage, close to 12,000 gallons of industrial chemicals were spilled into the soil and groundwater at the facility. The MWRD incurred substantial costs in responding to and remedying the contamination on the property. It then fi led an action under CERCLA Section 107 against North American Galvanizing and Coatings, the parent corporation of Lake River Corporation. The district court found against North American Galvanizing and Coatings on its motion to dismiss the Section 107 claim, which was affi rmed by the Seventh Circuit in an interlocutory appeal.
The Seventh Circuit based its decision on the plain language of CERCLA Section 107, which provides that a party shall be liable for necessary costs of response, consistent with the National Contingency Plan (“NCP”), incurred by “any other person.” The MWRD argued that “any other person” referred to any parties other than “the United States Government, or a State or an Indian tribe,” as set forth in the immediately preceding subsection, and therefore that Section 107(a) provided an implied right of contribution for any “other” party against other PRPs.
North American Galvanizing, on the other hand, disputed Section 107(a) created an authorization to sue in any respect, and simply outlined the various categories of liable parties under CERCLA. The EPA, fi ling a “friend of the court” brief, took a slightly different approach. While acknowledging that Section 107 did create a cause of action for some private parties, EPA contended that the phrase really meant anyone other than “other PRPs.” The EPA’s interpretation thus would have the effect of foreclosing Section 107 claims to any entity other than a non-liable party under CERCLA, or the federal, a state or a tribal government.
The Seventh Circuit adopted MWRD’s argument, allowing a liable party to recover its response costs under Section 107(a). In support of this interpretation, the court noted that such an interpretation was consistent with the “savings clause” in Section 113, which states that nothing in that subsection shall diminish the right of a person to bring an action for contribution in the absence of an enforcement action (which the Aviall court held was necessary for any contribution suit under Section 113 to proceed). The Seventh Circuit was also clearly persuaded by the policy argument – a contrary ruling would have the effect of severely diminishing the effectiveness of CERCLA to promote timely cleanups and not hold accountable all parties who are liable under the statute. The court expressed doubt that, without a cost recovery vehicle, any voluntary cleanups would ever occur, with most parties deciding to wait until forced to clean up the property by the government, which would then pave the way for a Section 113 contribution lawsuit.
The court dismissed the arguments of North American Galvanizing and the EPA to the effect that only the government should be allowed to bring claims under Section 107 in order to preserve the substantial leverage the government enjoyed in encouraging settlements under threat of enforcement and the government’s ability to offer settling parties protection from lawsuits by third-parties for those matters addressed in the settlement. The court noted that the government was not involved in the case and thus had no reason to pursue a settlement, which the court determined mooted the government’s position, at least in the present case.
The Split Among the Circuits
The Second, Seventh and Eighth Circuit decisions stand in stark contrast to the decision of the Third Circuit in DuPont. In that case, the plaintiff, DuPont, owned property that had allegedly been contaminated by government operations during World Wars I and II, and the Korean War. After DuPont undertook a voluntary cleanup in the absence of a pre-existing order from the government under CERCLA Section 106 or a lawsuit under CERCLA Section 107, it brought a contribution action against the federal government under CERCLA Section 113. Relying on its own prior precedent in other pre-Aviall CERCLA cases, the Third Circuit issued a fairly narrow ruling that CERCLA Section 107 did not create an “implied” cause of action for contribution. This decision, coupled with Aviall, essentially foreclosed any avenue for recovery of response costs from other liable parties in “voluntary” cleanup situations in the absence of a state statutory cause of action. While the DuPont court suggested that such plaintiffs were free to attempt a settlement with the government before proceeding with a cleanup in order to preserve a contribution claim under CERCLA Section 113, as a practical matter, the issue of timing and limited government resources may often foreclose this as a realistic alternative.
It now falls to the Supreme Court to resolve the split among the Circuits created by Aviall. Not only is the Supreme Court’s resolution of this issue important to give guidance to parties who wish to initiate cleanups of contaminated property without waiting for government intervention, but it also may be critical in many pending cases where the Section 107 issue is being litigated.
The Environmental Practice Group of Drinker Biddle Gardner Carton will be closely monitoring the developments in this area of the law. If you have any questions about this matter, feel free to call any member of the Environmental Practice Group.