Supreme Court Ruling Sets New Hurdle for CERCLA Plaintiffs

Wactor & Wick LLP
January, 2005

The U.S. Supreme Court rocked the Superfund world last month by ruling that a party who cleaned up a contaminated site—but who had not been sued or had not settled with EPA or a state—cannot sue other liable parties for  contribution. Cooper Industries, Inc. v. Aviall Services, Inc., 2004 Daily Journal D.A.R. 14753 (Dec. 13, 2004). The decision effectively reverses two decades of settled law on the availability of contribution for liable parties under  the Comprehensive Environmental Response Compensation and Liability Act, or “CERCLA,” 42 U.S.C. §9601 et seq. The United States, as amicus, supported the limitations on contribution adopted by the Court. On the losing side as amici were 23 states and Puerto Rico and numerous corporations and corporate organizations.

For years, no one questioned that a PRP had a right of contribution regardless of whether a suit had been filed. Indeed, the big question under CERCLA for the last decade has been the precise statutory section of CERCLA under which a “potentially responsible party” (or “PRP”) could sue: CERCLA Section 107 (the original CERCLA grant of jurisdiction enacted in 1980) or CERCLA Section 113 (the CERCLA contribution provision added by Congress in 1986).

Parties not liable under CERCLA (and the government) can sue under Section 107. That’s a big advantage, because the courts have held that joint and several liability may be available to plaintiffs in Section 107 cases. Since the1986 CERCLA amendments, however, most courts have ruled that parties with liability under CERCLA—which includes most purchasers of property who had nothing to do with the contamination (but who do not quality under the statute’s narrow innocent landowner exemptions)— could not sue for cost recovery under Section 107, but instead had to sue for contribution under Section 113. For example, the Ninth Circuit ruled that while a right of contribution for a PRP was implicit in Section 107, “the ‘machinery’ of Section 113 governs and regulates such actions, providing the details and explicit recognition that were missing from the text of Section 107.” Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1301-1306 (9th Cir. 1997).

Now, Aviall eliminates a PRP’s option to obtain contribution under CERCLA Section 113 unless that PRP has been sued under CERCLA or has entered into a settlement with EPA or a state. Unless the courts which have ruled out Section 107 lawsuits by PRPs revisit and reverse such decisions, a PRP who has cleaned up—but who has not settled with the government or been sued—has no CERCLA cause of action.

That’s a significant blow. CERCLA has been the most potent litigation tool for recovering cleanup costs, because there are a variety of difficult hurdles for plaintiffs suing under California statutes and common law. Now, there will be much less incentive to perform a cleanup until you are sued or until you settle with the government. That didn’t seem to bother the Court, which focused on a strict constructionist interpretation of the language of CERCLA Section 113:

Each side insists that the purpose of CERCLA bolsters its reading of Section 113(f)(1). Given the clear meaning of the text, there is no need to resolve this dispute or to consult the purpose of CERCLA at all. As we have said: “[I]t is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.”

Indeed, in response to Aviall’s counsel’s argument that CERCLA’s purpose was to “get parties involved in voluntary cleanup,” Justice O’Conner said in oral argument: “Well, perhaps Congress should have used different language. That’s our problem. We can’t make it up.”

This case was about the cleanup of four contaminated aircraft engine maintenance sites in Texas. Cooper Industries, Inc. owned and operated the sites until 1981, when it sold them to Aviall Services, Inc. Aviall operated the four sites for a number of years and then discovered contamination (caused by both parties). Aviall notified the state, which threatened to pursue an enforcement action if Aviall failed to clean up. But neither the state nor the EPA took any judicial or administrative measures to compel cleanup.

Aviall cleaned up and sued Cooper to recover up to $5 million in costs. The original complaint asserted a claim for cost recovery under CERCLA Section 107(a), a separate claim for contribution under CERCLA Section 113(f)(1), and state-law claims. In response to the Fifth Circuit’s ruling on the availability of contribution to PRPs, Aviall later amended the complaint, combining its two CERCLA claims into a single, joint CERCLA claim. That claim alleged that, pursuant to Section 113(f)(1), Aviall was entitled to seek contribution from Cooper, as a PRP under § 107(a), for Aviall’s response costs.

Aviall lost in the district court, and a divided panel of the Fifth Circuit affirmed. 263 F.3d 134 (2001). On rehearing en banc, the Fifth Circuit reversed, holding that Section 113(f)(1) allows a PRP to obtain contribution from other PRPs regardless of whether the PRP has been sued under Section 106 or Section 107. 312 F.3d 677 (2002).

The key language in Section 113(f)(1) provides as follows:

Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a), during or following any civil action under section 9606 or under section 9607(a)… Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section 9606 or section 9607.

The Fifth Circuit held that Section 113(f)(1) authorized suits against PRPs in its last sentence, which states that ‘nothing’ in the section shall ‘diminish’ any person’s right to bring a contribution action in the absence of a section 106 or section 107(a) action.” Id., at 681. The court also reasoned in part that “may” in the first sentence did not mean “may only.” Id., at 686-687.

he Supreme Court reversed, basing its decision on a completely different interpretation of the same language. The court rejected the Fifth Circuit’s conclusion (and Aviall’s argument) that “may” should be read permissively, such that “during or following” a civil action is one, but not the exclusive, instance in which a person may seek contribution: “There is no reason why Congress would bother to specify conditions under which a person may bring a contribution claim, and at the same time allow contribution actions absent those conditions.”

The court also rejected the Fifth Circuit’s (and Aviall’s) reading of the last sentence of Section 113(f)(1). The Court considered it a savings clause, rebutting any presumption that Section 113(f) is the exclusive cause of action available to a PRP. The court noted that Section 113 provides two express avenues for contribution: Section 113(f)(1) (“during or following” specified civil actions) and Section 113(f)(3)(B) (after “an administrative or judicially approved settlement” that resolves liability for some or all of a response action or costs to the United States or a State). Section 113(g)(3) then provides two corresponding three-year limitations periods for contribution actions, one beginning at the date of judgment (Section 113(g)(3)(A)) and one beginning at the date of settlement (Section 113(g)(3)(B)). The court considered significant the absence of any provision for starting the limitations period if a judgment or settlement never occurs, as is the case with a purely voluntary cleanup.  (However, the court did not address the fact that there is no limitations period in CERCLA referring to state administrative settlements.)

Justices Ginsberg and Stevens dissented, arguing that Aviall had a right to recover costs under Section 107. They noted that the courts had held that PRPs could sue in contribution under Section 107 prior to the 1986 amendments that created Section 113, and that nothing in Section 113 retracts that right.

However, the Court expressly declined to rule on the question of whether or not Aviall could recover its costs (1) explicitly under Section 107; (2) implicitly under Section 107; and (3) under some form of liability other than joint and several under any Section 107 action, since that those issues had not been briefed or argued.

Aviall portends a lot of confusion for would-be CERCLA litigants.

First, Aviall and others are likely to ask the courts to revisit whether Section 107 is available to PRPs (arguing that the courts which denied Section 107 claims to PRPs did so because they believed such claims were available under Section 113). Currently, however, Section 107 is not available to a PRP.

Second, EPA and state agencies are likely to be besieged with requests forgovernment involvement (“please sue me or settle with me”) at sites that are not on the government’s radar screens, and for which the government agencies have no resources.

Third, the effectiveness of traditional EPA and state enforcement approaches and policies may be undermined by Aviall. For example, EPA has sought to avoid litigation by issuing unilateral Section 106 administrative cleanup orders to multiple parties. A group of parties would typically comply, and then pursue non-complying parties. Under Aviall, however, the parties voluntarily complying with a unilateral Section 106 order would have to convince a court that the administrative order is a “civil action” to trigger a right of contribution under CERCLA against non-participating parties (which may be an insurmountable hurdle in this strict-constructionist era). If EPA actually sues the recalcitrant parties, those parties would have a contribution action under Aviall.

Fourth, private parties will have a harder time getting the federal government to pay its share of liability at contaminated sites. Private parties can sue the federal government under CERCLA, because of CERCLA’s explicit waiver of sovereign immunity. Without a CERCLA claim, jurisdiction over the federal government may be unattainable.

Fifth, it is unclear what kinds of administrative settlements will trigger a party’s right to sue under Section 113. (CERCLA says that a person who has resolved its liability “for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement” may seek contribution. Section 113 (f)(3)(B). For example, does a consent order under the Resource Conservation and Recovery Act qualify as such a settlement?)

Sixth, if a party is sued or settles, it is unclear what costs are recoverable post-Aviall. Are costs incurred before a suit is filed or a settlement is entered recoverable? If a party settles for certain costs, are costs outside the scope of the settlement recoverable?

Finally, parties will have to re-evaluate non-CERCLA causes of action, including the explicit right to contribution under state law provided in the recently enacted AB 389, Health & Safety Code Sections 25395.60-25395.119.

These and many other questions remain to be answered, not only for Aviall but for other parties voluntarily cleaning up sites. The only certainty is that, in the meantime, there will be more hurdles for those who voluntarily clean up sites and want to recover costs under CERCLA.

William D. Wick is a partner at Wactor & Wick LLP, an environmental law firm based in Oakland, California. He has been involved with CERCLA since its inception in 1980, as an attorney at EPA for 13 years (where he was the CERCLA Regional Counsel Branch Chief) and in private practice, where he represents many clients in CERCLA cases throughout the country, and counsels clients on environmental liability issues in property transactions.