The Making of Bad Law

Posted on May 24, 2017 by John Barkett

One of the challenges for lawyers involved in CERCLA litigation is educating the judge on how CERCLA works.  But when both the advocate and the court misapprehend how CERCLA works, Voila!  Bad law is made. 

CERCLA is hardly a model of clear drafting, but one area of confusion involves the difference in the burden of proof in the application of Section 107(a)(4)(A) and (B).  As CERCLA practitioners know, a party liable under one of the four categories of Section 107(a)(1) – (4) is liable under Section 107(a)(4)(A) to the United States, a State, or a Tribe for costs that are incurred “not inconsistent with the national contingency plan.”  On the other hand, under Section 107(a)(4)(B), “any other necessary costs of response incurred . . . consistent with the national contingency plan” is the standard applicable to private cost recovery claims.   

Washington State Dep't of Transp. v. Washington Natural Gas Co., 59 F.3d 793 (9th Cir. Wash. 1995) is one of many decisions that explain the distinction. In a 107(a)(4)(A) action, a defendant has the burden of proving that the government or Indian tribe’s costs are inconsistent with the National Contingency Plan (NCP) because of the presumption of NCP consistency attached to governmental or tribal actions. “In contrast, any ‘other person’ seeking response costs under § 9607(a)(4)(B) must prove that its actions are consistent with the NCP.”  59 F.3d at 799-800 (citation omitted).  In other words, Section 107(a)(4)(A) focuses on costs because consistency is presumed.  Section 107(a)(4)(B) focuses on actions because consistency must be proved.

Lawyers, law clerks, and judges who do not understand the distinction can become the purveyors of bad law.  Pentair Thermal Mgmt., LLC v. Rowe Indus., Inc. Nos. 06-cv-07164 NC & 10-cv-01606 NC, 2013 WL 1320422 (N.D. Cal. Mar. 31, 2013) illustrates the problem.  In Pentair, there was a cleanup of polychlorinated biphenyls in soils.  There was no quarrel with the NCP process leading up to the selection of an excavation remedy. But during remediation problems were encountered that resulted in adjustments to the remedy and increased costs. CERCLA practitioners know that fundamental changes to a National Priorities List-site remedy require another round of public participation.  40 C.F.R. §300.435(c)(2)(ii)(H).  To defeat plaintiff’s costs, defendant decided to argue that the changes to the remedy required re-notice to the public of the remedial action because they were fundamental changes, and thus plaintiff’s actions were not consistent with the NCP.

Defendant’s argument was premised on United States v. Burlington Northern Railroad Company, 200 F.3d 679 (10th Cir. 1999), where the court of appeals concluded that the Environmental Protection Agency’s problems during a remedial action did, indeed, represent a fundamental change to the remedy requiring re-notice to the public. The court of appeals held that despite an NCP violation, on remand, the burden of proof remained on the defendant to establish that “EPA’s remedial actions resulted in demonstrable excess costs that would not have otherwise been incurred.” Id. at 695.

The district court in Pentair found NCP consistency even with the changes to the remedy.  However, without appreciating the fact that Burlington Northern was a Section 107(a)(4)(A) case—presumably because defendant was relying on the decision—the court said that even if the remedial changes were fundamental, defendant would still lose based on Burlington Northern and another governmental cost recovery action, Minnesota v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019 (8th Cir. 2015).  Both of these were Section 107(a)(4)(A) cases where a defendant must prove which of the government’s costs were inconsistent with the NCP.  The district court in Pentair failed to appreciate the distinction.  It wrongly held that, had the district court determined that the remedy changes were fundamental, defendant would still have had the burden of proof to show which of plaintiff’s costs were non-NCP compliant. 

The dangers of dicta!  Compounded by the failure to comprehend the different burdens of proof in a 4(A) and a 4(B) action.  That’s the formula for making bad law.

Seventh Circuit Allows Cost Recovery Action for AOC Response Costs

Posted on January 25, 2013 by John Barkett

In Bernstein v. Bankert, the Seventh Circuit follows the Second, Third, Eighth, and Eleventh Circuits in holding a CERCLA plaintiff with a contribution claim under Section 113(f) does not have a cost recovery claim under Section 107.  But when does a signatory to an administrative order on consent (AOC) have a contribution claim?

Plaintiffs incurred response costs arising out of two administrative orders on consent (AOC).  The first AOC resulted in an engineering evaluation and cost analysis of removal options.  The second AOC resulted in implementation of the selected removal action.

The first AOC was carried out to its completion.  Completion of the second AOC was conditioned, however, upon the “complete and satisfactory performance by Respondents of their obligations under this Order” and issuance of a Notice of Completion by EPA, and neither condition had occurred at the time of the summary judgment.

The district court held plaintiffs could only sue in contribution and the limitations period had run on claims under both AOCs.

The court of appeals agreed on the claim arising out of the first AOC since that AOC had been completed and too much time had passed before suit was filed.  It disagreed on the claim arising out of the costs incurred under the second AOC, however, because Section 113(f)(3)(B) of CERCLA gives a contribution action to a person “who has resolved its liability to the United States … in an administratively … approved settlement,” and the second AOC had not yet been completed.  Thus, plaintiffs had not “resolved their liability” to the United States and could only bring a claim under Section 107 for which the limitations period had not yet run.  The court of appeals also held that whether costs are incurred voluntarily or involuntarily is irrelevant since 113(f)(3)(B) focuses only on whether liability had been “resolved.” 

There was no discussion of what might happen if the second AOC was completed during the course of the litigation so all CERCLA lawyers should stay tuned.

U.S. SUPREME COURT REFUSES TO WEIGH IN ON CONTINUING CERCLA COST RECOVERY VS. CONTRIBUTION SAGA

Posted on November 21, 2012 by William Hyatt

On October 9, 2012, the Supreme Court denied a petition for certiorari in Solutia, Inc v. McWane, Inc., declining to further clarify the question raised and expressly left unanswered in footnote six of the Court’s opinion in United States v. Atlantic Research Corp., 551 U.S. 128 (2007).  The issue is what section of CERCLA provides private parties with the authority to recover their costs at Superfund sites from other “covered persons” liable under the statute — Section 107(a) or Section 113(f).  The choice is important because different rules of liability and different statutes of limitation apply to contribution and cost recovery claims.  In Solutia, the Eleventh Circuit ruled that a party subject to a consent decree is limited to a claim for contribution under Section 113(f) and does not also have a claim for cost recovery under Section 107(a).

In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), the Court held that contribution under Section 113(f) is available to a private party only “during or following” a suit under Sections 106 or 107.   In Atlantic Research, the question was whether a “covered person” under CERCLA could obtain cost recovery under Section 107(a)(4) in circumstances in which contribution was not available under the holding in Cooper Industries.  In Atlantic Research, the Court explained that Sections 107(a) and 113(f) provide “clearly distinct” remedies available in different circumstances.  Contribution under Section 113(f) is available “when a party pays to satisfy a settlement agreement or a court judgment,” because, then, the party “does not incur its own costs of response.  Rather, it reimburses other parties for costs that those parties incurred.”  “By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution.  A private party may recover under § 107(a) without any establishment of liability to a third party.  Moreover, § 107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site.”

That explanation left unanswered the question of what section of the statute applies in the common situation in which parties enter into settlements or sign consent decrees, agreeing to perform work.  Those parties have a right to contribution under Section 113(f), but they also incur their own cost in cleaning up a site.  In footnote 6 in the Atlantic Research opinion, the Court expressly declined to decide that question (“We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both.”).

Litigation of that unanswered question followed in the lower courts.  The Eleventh Circuit in Solutia referenced decisions in the Second (Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010)), Third (Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204 (3d Cir. 2010)) and Eighth (Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594 (8th Cir. 2011)) Circuit Courts of Appeals to decide that parties settling their CERCLA liability with government agencies are limited to Section 113(f) contribution claims, even though they incur their own costs of response in complying with the settlement (“[w]e agree with our sister circuits that we must deny the availability of a §107(a) remedy under these circumstances in order [ ] ‘[t]o ensure the continued vitality of the precise and limited right to contribution”). 

The Supreme Court’s denial of petition for certiorari in Solutia is not necessarily the final word on the long running saga of the interplay between Sections 107(a) and 113(f).  For example, it may be appropriate to limit a potentially responsible party to Section 113(f) contribution claims when it is subject to a consent decree, because a consent decree would generally be filed with the court accompanied by a complaint, be subject to public comment, resolve a party’s CERCLA liability to the government, and provide the party with contribution protection.  The Third Circuit in Agere found that the contribution protection granted to plaintiffs under a consent decree would allow plaintiffs complete recovery under §107(a), while at the same time shielding those plaintiffs from a contribution counterclaim.  This would be a “perverse result,” as the plaintiffs had stipulated that they were responsible for a significant portion of contamination at the site.  However, a different conclusion may be warranted under different facts.  Indeed, the Court in Agere noted that it “need not decide the contours of the overlap postulated in Atlantic Research because, regardless of whether §107(a) and §113(f) remedies overlap at all, they cannot properly be seen to overlap here.”  Thus, “the contours of the overlap” may be an issue to be decided another day.

The 11th Circuit Weighs in on the CERCLA §107 vs. §113 Debate

Posted on May 14, 2012 by Jarred Taylor

The ACOEL blog has devoted several entries over the last two years to the question whether and how a plaintiff could recover, under CERCLA, costs it incurred for a cleanup performed under a consent decree or administrative settlement.  One of the more intriguing developments for CERCLA practitioners has been the tension between and radical differences to cost recovery or contribution claims under Sections 107 and 113 of CERCLA.  One of the more recent developments is the 11th Circuit decision in Solutia v. McWane (Full disclosure: I am counsel to several defendants in this case). 

"Boots" Gale previously blogged about the District Court decision. The District Court dismissed Plaintiffs’ Section 113 claim on the basis that these Defendants had the benefit of CERCLA’s contribution protection obtained via their own administrative settlement with EPA.  Initially, the District Court denied summary judgment on Plaintiffs’ Section 107 claim, but then reconsidered and reversed that decision. 

The 11th Circuit noted that the Supreme Court's Atlantic Research decision declined to decide the issue of whether a party may bring a 107(a) claim for direct cleanup costs incurred via a consent decree entered as past of CERCLA Section 106/107  litigation.  The 11th Circuit confirmed, however, the conclusion of the District Court that numerous federal Circuit Courts had reached that issue since that time, each one concluding Section 113 to be the party’s exclusive remedy, and denying the Section 107 claim.  Relying in part on the conclusions reached by these other Circuit Courts, the 11th Circuit rejected Plaintiffs’ statutory interpretation arguments, and concluded that a party who has a CERCLA Section 113(f) claim cannot also maintain a CERCLA Section 107 claim.  To find otherwise, the 11th Circuit concluded, would “thwart the contribution protection afforded to parties that settle their liability with the EPA…”, “destroy CERCLA’s statutorily-created settlement initiative…”, would allow a plaintiff to impose joint and several liability on defendants, and would prevent those defendants from asserting any Section 113(f) counterclaim since the plaintiffs would have their own CERCLA contribution protection via their consent decree. 

The time has not run yet for the Plaintiffs in this case to seek certiorari from the Supreme Court.  In light of the unanimity of the federal Circuit Courts on this issue, it seems unlikely that the Court would accept the case for decision, despite the importance of the issue and the Court’s decision not to reach the issue in its 2007 decision in Atlantic Research.

The Continuing Saga of Cost Recovery and Contribution Claims Under CERCLA Sections 107 and 113

Posted on May 4, 2011 by Jarred O. Taylor, II

In his July 8, 2010 ACOEL blog entry, Fournier “Boots” Gale of this firm reported on the then-most recent court decision dealing with whether and how a plaintiff could recover, under CERCLA, costs it incurred for a cleanup performed under a consent decree or administrative settlement. One of the more intriguing developments for CERCLA practitioners has been the tension between and radical changes to cost recovery or contribution claims under 107 and 113 of CERCLA. Boots reported on the July 2, 2010 decision by a federal judge here in Alabama to grant complete summary judgment to defendants, finding that a party compelled to incur such costs can only proceed under Section 113, and not 107. Because the defendants in that case had also entered into an administrative settlement with EPA for the same site, thus obtaining Section 113 contribution protection, all of plaintiffs’ claims were dismissed. That case is still on appeal to the 11th Circuit. The issue decided by the Alabama federal court--whether compelled costs were recoverable under Section 107, 113, or both—had been left unanswered by the United States Supreme Court in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). Courts have been struggling with this issue ever since.

 

The latest opinion on this issue is from the 8th Circuit, in Morrison Enterprises, LLC v. Dravo Corp., 2011 WL 1237526 (8th Circuit, April 5, 2011). The 8th Circuit was the federal circuit court whose decision was affirmed in the Atlantic Research case, so the result in this case is not surprising. Noting the question unanswered by the United States Supreme Court in Atlantic Research, the Morrison Court, as did the federal court in Alabama, concluded that Section 113 was the appellants’ exclusive remedy, confirming the summary judgment granted by the district court below on the Section 107 claim. One of the Morrison appellants argued to the district court that one of the contaminants it cleaned up was totally unrelated to its operations and, thus, the costs it incurred related to that contaminant were “voluntary” and thus recoverable under Section 107. Interestingly, the plaintiffs in the Alabama case made the same argument. Both the Alabama and 8th Circuit Courts rejected the argument because all of the work was performed under and pursuant to a consent decree, which was broad enough to encompass the costs for cleaning up the contaminant sought to be carved out as voluntary. In effect, even if one wishes to argue later that some costs incurred were for a contaminant for which one had no responsibility, if the costs incurred are pursuant to that consent decree, or administrative settlement, then the costs are not incurred voluntarily and a Section 107 claim is still barred. In a final blow to the cost recovery efforts in this case, the appellant attempted to amend its complaint to assert a Section 113 claim after summary judgment had been entered on its 107 claim, but the district court denied it as untimely (and the Morrison court affirmed on this issue, too).

The Deck is Still Stacked in the Government's Favor -- Is This A Good Thing?

Posted on July 22, 2010 by Seth Jaffe

Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

EPA Issues a New Policy on Superfund Negotiations: Time For Another Rant?

Posted on October 19, 2009 by Seth Jaffe

Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

A Rant Against Superfund

Posted on April 15, 2009 by Seth Jaffe

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

 

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.