Deal or no Deal? - Partial Dismissal of CERCLA Claims Against United States and Tribal Entities

Posted on May 19, 2016 by Larry Ausherman

Three companion decisions in Atlantic Richfield Co. v. U.S. et. al., Case No. 1:15-cv-00056, in the U.S. District Court for the District of New Mexico, provide insight on the CERCLA statute of limitations, potential pitfalls in pleading CERCLA claims, and the defense of sovereign immunity by an Indian Pueblo in the context of CERCLA and contract claims.  The case remains pending.

In the 1940s, when the war was over, the federal government was in the market for uranium concentrate for bombs, and it encouraged private entities to mine and mill uranium for sale to the government at prices set by the government.  Much of the country’s uranium reserves were in the Grants Uranium Belt in western New Mexico, an area that includes the Laguna Pueblo. 

Uranium was discovered on Laguna Pueblo lands in 1952, and Anaconda Copper Mining Company entered into mining leases with Laguna, which were approved by the Bureau of Indian Affairs, acting pursuant to its trust responsibility to the Pueblo.  Much uranium was mined there from the Jackpile Paguate mine beginning in 1952, and operations continued until 1982.        In 1986, the Pueblo and Anaconda’s successor, Atlantic Richfield Co. (“ARCO”), entered into an agreement to terminate the leases and perform remediation.  ARCO agreed to pay the Pueblo to perform remediation, and the Pueblo agreed to assume all liability and release ARCO regarding it.  The Department of the Interior approved the agreement and, following the preparation of an EIS, BLM and BIA issued a ROD that established requirements for the remediation.  ARCO paid $43.6 million to the Pueblo to perform the remediation and release ARCO. 

All defendants were involved in varying degrees with the remediation.  BIA had responsibility to determine the extent of remediation required and approve key remediation decisions according to a cooperative agreement with the Pueblo.  But BIA and the Pueblo saw in ARCO’s $43.6 million payment an economic development opportunity.  The Pueblo formed Laguna Construction Company (“LCC”) to conduct the remediation, and BIA ceded certain oversight to the relatively inexperienced LCC as well.  Work on the initial remediation ended in 1985.  Beginning in 2007 the Pueblo, and then EPA, investigated the adequacy of mine reclamation at the mine site and found problems.  In 2012 EPA proposed listing on the NPL, and in 2014 it asserted that ARCO should fund the RI/FS, but EPA has brought no litigation. 

ARCO claims that the remediation was mishandled and brought CERCLA claims against the United States, the Pueblo and LCC, seeking cost recovery, contribution, and declaratory relief.  The United States moved to dismiss.  In detailed decision by Senior United States District Judge, James A. Parker, all of ARCO’s claims against the United States were dismissed.    In companion decisions, some claims against the Pueblo and LCC were dismissed and some survived motions to dismiss.  Dismissals were based in part on the CERCLA statute of limitations, the court’s determination that the ARCO pleadings were deficient and sovereign immunity.

ARCO sought to recover two categories of response costs:  (1) the $43.6 million it paid to the Pueblo in 1986 in exchange for the Pueblo’s agreeing to be responsible for the remediation and to release ARCO from all responsibility for it; and (2) the significant costs ARCO incurred in responding to EPA’s more recent efforts to shift responsibility to ARCO.  The Court dismissed ARCO’s claims for cost recovery and contribution for the 1986 settlement payment as time barred.  The Court dismissed ARCO’s claim to recover the costs in responding to EPA and associated investigation as inadequately pled to establish that the expenditure constitutes “necessary costs of response.”  Claims for contribution under 113(f)(1) (referenced by the court as “post judgment contribution claim”) were dismissed as premature because ARCO had not been sued.  Finally, the claims against the United States for declaratory judgement were dismissed; the court ruled that ARCO cannot bring a claim for declaratory relief because it has failed to establish a valid underlying contribution or cost recovery claim. 

Claims against the Pueblo and LCC are somewhat more complicated as a result of sovereign immunity defenses they raised.  The court considered the sovereign immunity defense asserted by both Laguna Pueblo and LLC, its federally-chartered Tribal Corporation.  The Court concluded that both the Pueblo and LCC are entitled to assert sovereign immunity as a bar to ARCO’s CERCLA claims because the language of existing waivers of sovereign immunity was not unequivocal enough to cover CERCLA claims.  The Court therefore dismissed those CERCLA claims.  However, the court found that the Pueblo and LCC waived sovereign immunity with regard to ARCO’s breach of contract claims.  The source of this waiver for the Pueblo is in the 1986 Agreement to Terminate Leases.  The court found that this agreement served to waive sovereign immunity from claims brought under that contract.  Regarding LCC, the source of the waiver of sovereign immunity for breach of contract claims was in the Articles of Merger associated with the merger of LCC from a New Mexico corporation to a federal LCC formed under 25 USC §477, which may assert sovereign immunity.  A motion for reconsideration by LCC is pending.

Although the facts of Atlantic Richfield are unique, its lessons are broader.  First, in pleading a CERCLA claim for cost recovery, care should be taken to allege in some detail facts which support all elements of the claim, including facts showing that necessary response costs within CERCLA were incurred.  Second, without adequate waiver of sovereign immunity, the settlement and payment in exchange for a release and commitment by a tribe or tribal corporation to assume full responsibility for clean-up may leave the door open for CERCLA liability in the future without recourse through CERCLA-based contribution and cost recovery claims.  Finally, although the court’s decision confirmed that the defense of sovereign immunity applies to CERCLA contribution and cost recovery claims brought by private parties against sovereign Indian tribes and their federally chartered corporations, the court’s analysis confirms that under the right circumstances, a tribe may waive its sovereign immunity protections. 

Fresh Breeze or Last Sigh? Budha Ismail Jam et al v. International Finance Corporation, No 15-cv-00612 (JDB) (D.D.C.)

Posted on May 16, 2016 by Todd D. True

The Tata Mundra “Ultra-Mega” coal-fired power plant on the coast of India north of Mumbai is a behemoth by any measure.  Capable of producing over 4,000 megawatts of electricity from five huge boilers, it can consume over 12 million tons of coal per year and requires millions of gallons of seawater a day for its once-through cooling system.  Indeed, the plant is so large it requires its own coal port, its own water intake channel (nearly 150 meters wide) and its own outfall that discharges warm water equal to almost half the mean flow of the Potomac River.

For generations, the area where the plant is now located supported a system of small fishing villages where fishing families move from inland locations to the coast for several months each year following the monsoon to catch and dry fish which they sell to traders.  This income has supplemented income from agriculture and provided the villages and families with a subsistence living. 

The arrival of the Tata Mundra Plant changed all that:  construction disrupted access to fishing locations; dredging altered the natural systems and the fish disappeared as water salinity and temperature changed; fresh water supplies dwindled as the plant’s water use led to increased saltwater intrusions into groundwater; and a way of life that had sustained families and villages disappeared.

So what does this story of displacement and disruption half way around the world have to do with environmental law in the U.S.?  In today’s world, where it’s clearer day-by-day that everything is connected to everything else, the answer is “more than you might think.” 

The Tata Mundra Plant would not have been built without financing from the International Finance Corporation (IFC) based in Washington.  The IFC is an organization of member states and part of the World Bank Group.  To its credit, the IFC recognized the environmental risks of the project from the outset noting that it had the potential to have “significant adverse social and/or environmental impacts that are diverse, irreversible, or unprecedented.”  And, consistent with its lending policies, it put in place as part of its loan agreement social and environmental performance standards and requirements to mitigate these impacts. 

It all looked good on paper.  But then the plant was built and the IFC looked the other way.  We know this because individual villagers who depended on the resources the Tata Mundra Plant destroyed complained through a local fishing union and village government to the IFC’s ombudsman office.  That office issued a scathing report criticizing the IFC for its multiple failures to ensure implementation of the protective measures in its loan agreement.  The IFC shrugged; the ombudsman’s office has no enforcement powers.

Frustrated with their inability to achieve any meaningful accountability through the IFC, a handful of individual fishers and villagers, a local fishing union, and a village governmental entity filed a complaint against the IFC in the U.S. District Court for the District of Columbia, Budha Ismail Jam et al v. IFC, No 15-cv-00612 (JDB), in April of 2015.  The IFC moved to dismiss the complaint on sovereign immunity grounds.  The IFC is covered by the International Organizations Immunities Act (“IOIA”), which Congress passed in 1945, and is entitled to the “same immunity” in U.S. courts as foreign nations. While the immunity enjoyed by foreign nations has changed significantly since 1945, the IFC asserted that its had not -- and remained near-absolute.

The District Court concluded, in light of longstanding D.C. Circuit precedent dealing with immunity from wage garnishment proceedings for an employee of one of the IFC’s sister international organizations, the Inter-American Development Bank, that it was bound to dismiss the complaint against the IFC on sovereign immunity grounds.  Budha Ismail Jam et al v. IFC, No 15-cv-00612 (JDB), Memorandum Opinion (Mar. 24, 2016 D.D.C.).

This outcome raises serious questions about the accountability of international lending organizations like the IFC that finance potentially environmentally destructive project around the world while professing to follow the most stringent lending practices for protecting people and the environment.  If we are “all in this together,” a serious failure of accountability on the other side of the world is not something we can just shrug off as someone else’s problem.  We live in a global commons – industrial projects built anywhere can affect us all.  The most obvious example is the effects on the climate from the dramatic expansion of fossil fuel-based power generation around the world, much of it built with international financial support, often originating in the U.S.

Nor is the law of sovereign immunity as clear or unfavorable to the plaintiffs as the District Court’s decision suggests.  First, since 1945, sovereign immunity for foreign states has developed a well-recognized exception for commercial activities, activities that do not enjoy immunity.  IFC lending decisions – on which the IFC makes a profit – are nothing if not commercial activity.  Second, and maybe more significantly, sticking with an out-dated, circa-1945 version of sovereign immunity actually undermines the credibility of the IFC itself.  For the IFC to continue enjoying the financial support of its member states, its commitment to responsible lending must be real and reliable, not illusory.  If it continues to finance projects without real environmental accountability, its members may become inclined to withdraw their support because they will not want it lending to their neighbors: environmental harms don’t recognize geo-political boundaries and irresponsible financing for a polluting facility in one country may well harm another.

Because the facts of Budha Ismail Jam et al v. IFC are so stark, because accountability in international finance for major industrial projects is increasingly important both here and abroad in a world facing rapid climate change and its effects, and because the plaintiffs are appealing the District Court’s order of dismissal, this is a case worth watching.  It could be the first whisper of a new breeze in accountability for the environmental effects of international lending decisions -- or the last sigh from beneath a suffocating blanket of sovereign immunity.