In a June 9, 2014, decision resolving a circuit split, the U.S. Supreme Court ruled in CTS Corp. v. Waldburger that federal environmental law does not preempt state statutes of repose that bar tort claims for personal injury or property damage arising from a release of hazardous substances. Although federal law expressly preempts state statutes of limitation to the extent state law would provide for an earlier commencement, and hence expiration, of the limitations period to file such claims, the Court concluded that neither the relevant statutory language nor the legislative history supported an extension of federal preemption to state statutes of repose, which categorically bar claims after specified period of time. As a result, the Court held that the plaintiffs’ claims, which were filed 24 years after the last act of the defendant which could have given rise to the claims, were barred by North Carolina’s 10-year statute of repose, even if the plaintiffs’ claims were filed within the statutory limitations period that did not begin to run until the plaintiffs discovered the bases for their claims.

Background

For more than 25 years, CTS Corporation manufactured and stored electronics at its plant in Asheville, North Carolina. In 1987 it sold the site, representing at the time that the site posed no threat to human health or the environment. In 2011, 24 years after the sale, owners of the former CTS property and adjacent landowners filed suit against CTS in the U.S. District Court for the Western District of North Carolina, alleging that contamination from CTS’ operations resulted in a nuisance, diminution of property value, and potential health effects.

CTS moved to dismiss the claims against it based on North Carolina’s statute of repose, which prohibits a cause of action from accruing more than 10 years after the last act or omission that could give rise to a claim. Concluding that the last act of CTS that gave rise to plaintiffs’ claims occurred in 1987 when CTS sold the property, the district court ruled that plaintiffs’ claims were barred by the 10-year statute of repose and granted the motion to dismiss.

On appeal, the U.S. Court of Appeals for the Fourth Circuit reversed, in a 2-to-1 decision, holding that provisions of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. Section 9658, preempted the North Carolina statute of repose. Siding with a prior decision of the U.S. Court of Appeals for the Ninth Circuit, but disagreeing with a prior decision of the U.S. Court of Appeals for the Fifth Circuit, the Fourth Circuit majority concluded that the provisions of CERCLA Section 9658 established a federal “discovery rule,” which prohibits any state “limitations period” — whether in a statute of limitation or statute of repose — from beginning to run before the plaintiffs knew or reasonably should have known that their personal injuries or property damages were caused by a release of hazardous substances.

The Supreme Court’s Decision

In a 7-2 decision authored by Justice Kennedy, the Supreme Court reversed the Fourth Circuit. After a brief overview of the legislative history of Section 9658 and the procedural history of the case, the Court discussed the different purposes and mechanics of statutes of limitation and statutes of repose. The Court noted that statutes of limitation are intended to encourage plaintiffs to diligently prosecute their claims, and therefore, are subject to delayed commencement or equitable tolling if circumstances exist that would excuse a plaintiffs’ failure to prosecute its claims. Statutes of repose, on the other hand, reflect a legislative determination that, at some point, a defendant should no longer be under the threat of liability for past acts or omissions and are not subject to tolling or avoidance.

Reviewing and rejecting the Fourth Circuit majority’s reliance on the remedial purpose of CERCLA to inform an interpretation of Section 9658, the Supreme Court focused on the language of Section 9658, which it noted referred to “statutes of limitation” four times, but did mention “statutes of repose” even once. Moreover, the Court noted that the statute describes the “applicable limitations period” as “the period” during which a “civil action” under state law “may be brought.” The Court found that this definition presupposed that “a [covered] civil action exists,” explaining that while a statute of limitations generally begins to run “after a cause of action accrues and so always limits the time in which a civil action ‘may be brought,’” a statute of repose is “not related to the accrual of any cause of action” but mandates that there shall be no cause of action beyond a certain point, even if no cause of action has yet accrued. The Supreme Court also pointed out that Section 9658 provided for equitable tolling for “minor or incompetent plaintiff[s].” Because equitable tolling does not apply to statutes of repose, the Court reasoned that the inclusion of a tolling rule indicates that Section 9658 applies only to statutes of limitations.

The Supreme Court found further support for its interpretation in the 1982 Study Group Report commissioned by Congress that preceded the enactment of Section 9658. The Study Group Report recognized the distinction between statutes of repose and statutes limitation and recommend that states repeal both because of the long latency period for personal injury and property damage claims arising from a release of hazardous substances. When Congress enacted Section 9658 a short while later, however, Congress dropped the reference to statutes of repose that was contained in the Study Group Report. The Court thus found it is reasonable to conclude that Congress did not intend to preempt both types of statutes.

Implications

The immediate impact of the Supreme Court’s decision will be to allow defendants facing toxic tort claims arising from historical releases of hazardous substances to seek to dismiss such claims, if barred by an applicable state statute of repose. Future claims in such states also will be subject to the “expiration” date on such claims in the state statute of repose. Many states, however, do not have statutes of repose that apply to such claims. Therefore, the Supreme Court’s decision could prompt some states to enact statutes of repose in an effort to limit the assertion of claims decades after the conduct giving rise to the claims. The Supreme Court’s conclusion that the “remedial purpose” of CERCLA cannot be read to expand the reach of the statute beyond its plain language also may have implications for the interpretation of other CERCLA provisions or even other environmental laws.