Superfund: After Nearly Forty Years, Still a Work in Progress

Posted on October 19, 2017 by William Hyatt

Since its enactment, the Comprehensive Environmental, Response, Compensation and Liability Act of 1980, commonly known as the Superfund statute, has probably received more diagnostic attention than any other environmental law.  That is not surprising, considering EPA has devoted more resources to the Superfund program than to any other program the agency administers.  Matters were not helped by the program’s rocky start, with allegations of impropriety swirling around the agency and the head of the Superfund program winding up in jail. Meanwhile, the liability regime designed to fund the Superfund program spawned an avalanche of litigation, resulting in crushing transaction costs.  Over the years, the Superfund program has been consistently controversial and has undergone a steady stream of “reforms,” reports to Congress and GAO studies. The statute itself has also been repeatedly criticized, including by the Supreme Court, for its lack of clarity.

As two recently released reports attest, the diagnostic process continues.  Both reports should be required reading for Superfund practitioners, but the question remains whether the underlying structural problems of the statute have been, or even can be addressed.

The first report is a paper commissioned by the American Council of Engineering Companies, entitled Superfund 2017, Cleanup Accomplishments and the Challenges Ahead.  The author, Katherine Probst, is a longtime, thoughtful commentator on Superfund matters and was a key member of the Resources for the Future team that issued a 2001 Report to Congress, entitled Superfund’s Future: What Will It Cost? A Report to Congress.  Her latest effort is largely a report card on the Superfund remedial program, lamenting the lack of sufficient information to conduct a thorough diagnosis. She makes a number of recommendations that the missing information be gathered, following which a new diagnosis would presumably be undertaken. In the meantime, the Probst report makes a number of interesting, but telling observations. For example, right from the start, EPA has struggled to measure the success of the cleanup program, but Probst points out that even though a significant percentage (24%) of non-federal sites have been deleted from the National Priorities List (NPL), and another 48% have been deemed “construction complete,” seven percent of sites on the NPL are still characterized as “human exposure not under control” and another 10% lack sufficient data to make a protectiveness determination.  Federal funding for Superfund continues to decline; states also face shrinking resources.  Not surprisingly, cleanup progress has slowed, not just for lack of funds, but also because the sites in the cleanup program today tend to be far more complex (and expensive) than the NPL sites of the past. EPA finds itself continuing to implement a prescriptive cleanup program that was not designed for many of the more complex sites on the 2017 NPL (e.g., mining and contaminated sediment sites).

The second document, entitled Superfund Task Force Recommendations, was issued by EPA in June, 2017. The Task Force was charged by the Administrator “to provide recommendations on an expedited timeframe on how the agency can restructure the cleanup process, realign incentives of all involved parties to promote expeditious remediation, reduce the burden on cooperating parties, incentivize parties to remediate sites, encourage private investment in cleanups and sites and promote the revitalization of properties across the country.”   These familiar themes led the Task Force to identify five basic goals, forty-two recommendations and various strategies for improving the Superfund program.  All the goals and recommendations are directed at speeding up the process of cleanup.  For example, one strategy advocates the use of “adaptive management” to expedite cleanup through use of early actions, interim records of decision and removal actions. Another advocates more centralized management of complex sites to assure consistency and aggressive oversight.

Even if all the recommendations contained in these two latest reports were to be accepted and implemented, the Superfund program would likely still be highly controversial with many of the challenges identified in the early days of the program still remaining to be solved.  Among those challenges are the following:

·         Is the National Contingency Plan (NCP) still the best “cookbook” for cleanup?  If not, what changes should be considered to achieve cleanup faster and better? Is the Superfund program too “process heavy?”  Is amendment of the NCP even politically feasible?

·         How can cleanups be accomplished with less study?  Particularly at complex mega-sites, NCP-compliant studies can take far too long.  Is the NCP process too prescriptive and too inflexible? 

·         How to measure success?  Should the key measurement be “construction complete,” or deletion from the NPL, or reduction of risk, or something else?  Should there be intermediate metrics of success?

·         Should there be greater centralized management of the Superfund program, as the report of the Superfund Task Force appears to advocate?  How should that be accomplished?  What is the appropriate role for CSTAG and NRRB?

·         How clean is clean?  Should the Superfund program chase every last molecule of hazardous substances, or reduce risk as quickly as possible?  Should there be greater use of the removal program?  As the saying goes, is “perfect the enemy of good?”

·         What should “cost effectiveness” mean in context of the Superfund program? Should proposed remedies be subjected to a cost-benefit analysis?

·         What is the proper role of EPA “guidance” in implementing the Superfund program?  Should guidance be binding on EPA?  Could that happen without notice and comment rulemaking?

·         Are the remedies implemented thus far in the Superfund program really effective?  For example, many groundwater cleanup programs were projected to have cleaned up contaminated groundwater by now.  Has that happened?  Can the pumps be turned off?

·         Should federal funds be used to leverage private party investment in cleanups?  Does EPA’s orphan share policy strike the right balance?

·         Does the statute strike the right balance between the federal and state interests in cleanup?  Should EPA and the states be true “partners”?

·         Should the lapsed Superfund tax be reinstated?  If so, in what form?

·         Finally, is there a role for fairness in Superfund?  Is the ban on pre-enforcement review too harsh a standard?

As this list of challenges demonstrates, Superfund will almost certainly remain a key subject for continued diagnosis in the future.

The Enforcement of CERCLA Section 106 Orders; the Seventh Circuit Suggests a New Twist

Posted on November 2, 2016 by William Hyatt

Superfund practitioners have long known that unilateral orders issued by EPA under Section 106(a) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), commonly known as the Superfund statute, can be very potent enforcement tools.  Recipients of such orders who “willfully” choose to defy them, “without sufficient cause,” face the prospect of potentially ruinous civil penalties under Section 106(b) and treble damages under Section 107(c)(3).  The term “sufficient cause” is not defined in CERCLA and has been subjected to very limited judicial interpretation.  Making matters worse, by virtue of Section 113(h), Section 106 order recipients cannot obtain pre-enforcement review of such orders.  Instead, they must wait until EPA brings an enforcement action, or one of the other triggers listed in Section 113(h) occurs (while the penalties and treble damages continue to accumulate, for a period which could last for years), before they can obtain a judicial determination of whether or not their defiance was “without sufficient cause.”  This enforcement scheme has thus far withstood due process challenges on the ground that no penalties or treble damages can be imposed until there is a court hearing.  Waiting for that court hearing can produce extreme apprehension on the part of defiant order recipients.

In United States v. Glatfelter, one of the prodigious number of reported decisions relating to the Lower Fox River Superfund Site, the Court of Appeals for the Seventh Circuit, after concluding that permanent injunctions will not be available to enforce Section 106 unilateral orders, suggested how that apprehension might be relieved:

“Nothing we have said prevents the government from seeking declaratory relief to establish that a PRP lacks sufficient cause for noncompliance, such as the arbitrariness of the selected remedy or a defense to liability.” 

This suggestion may trigger a whole new round of litigation regarding Section 106 orders.  For instance, does a private litigant enjoy the same right to seek declaratory relief?

THE SEVENTH CIRCUIT BREATHES NEW LIFE INTO THE DIVISIBILITY OF HARM

Posted on November 19, 2014 by William Hyatt

DEFENSE TO JOINT AND SEVERAL LIABILITY

On September 25, 2014, the Seventh Circuit added two more opinions to the long list of decisions arising out of the Lower Fox River and Green Bay Superfund Site (Fox River Site) in northeastern Wisconsin.   

In NCR Corp. v. George A. Whiting Paper Co., a contribution suit, the court reversed and remanded a decision by the Eastern District of Wisconsin, which had held that NCR was not entitled to any contribution from the other defendants. 

In U.S. v. P.H. Glatfelter Co. (Glatfelter), an enforcement action, the court ruled on a number of important CERCLA issues, such as whether a permanent injunction can be issued to enforce a Section 106 unilateral administrative order.  In affirming in part and reversing in part the same District Court decision, the Seventh Circuit provided the latest appellate guidance on the divisibility of harm defense to joint and several liability.  

The District Court had rejected divisibility of harm defenses raised by defendants NCR and Glatfelter, ruling, as a matter of law, that the “harm” in one of the operable units of the Fox River Site (OU-4) was not “theoretically” capable of being divided.  The District Court ruling thereby avoided the second step of the divisibility of harm analysis, the factual question of how a divisible harm might be apportioned.  That was the question resolved by the Supreme Court in Burlington N. & Santa Fe R.R. Co. v. United States (Burlington Northern), a decision which gave Superfund practitioners great hope because the apportionment approved by the Court was so imprecise. Litigation in the lower courts following Burlington Northern quickly turned to the question of what makes a harm “theoretically” capable of being divided.  The question is whether it is possible to approximate the contamination caused by each party.

In the District Court, defendants NCR and Glatfelter argued for divisibility of harm on different theories.  NCR admitted that it had contributed to the contamination in OU-4, but argued that the harm was capable of apportionment and that it should be liable only for its apportioned share of the costs.  Glatfelter argued that it did not cause any of the contamination in OU-4 and therefore was not liable for the costs of cleaning up OU-4. 

As to NCR, the Seventh Circuit first addressed the question of what the appropriate metric should be for measuring the contamination caused by each party.  The District Court, after a lengthy trial, had viewed the harm as “binary,” in the sense that contamination in concentrations above EPA’s maximum safety threshold of 1.0 ppm of PCBs was harmful; whereas, concentrations below that level were not.  The Seventh Circuit rejected that “on-off switch” approach on the ground that the evidence at trial had shown that the dividing line between “harmfulness and geniality” was much more subtle.  The Seventh Circuit reviewed the various metrics used by EPA to measure harm and settled on “surface weighted average concentrations” (SWAC) of 0.25 ppm throughout OU-4 as the appropriate value.  Even that value, however, could not be viewed as “binary,” according to the Seventh Circuit , because lesser concentrations still could pose risks of harm.  

This analysis led the Seventh Circuit to reconsider whether remediation costs can be a useful approximation of the contamination caused by each party.  The District Court had concluded that, like contamination levels, remediation costs were “binary” in the sense that “sediment with PCB concentrations below 1.0 ppm would impose no remediation costs, while sediment with PCB concentrations above 1.0 ppm would always impose about the same remediation costs.”  The Seventh Circuit said “[w]e think the district court got this wrong as well.”  Instead, “remediation costs increase with the degree of contamination above 1.0 ppm.  As a result, remediation costs are still a useful approximation of the degree of contamination caused by each party.”  As the Seventh Circuit explained, that is so because “the cost of the remedial approach in a particular area is positively correlated with the level of contamination near the surface of that area, which contributes to the operable unit’s SWAC, and consequently, the harm.”

The Seventh Circuit concluded:

As a result, we think the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4.  And if NCR cleared that hurdle, we think a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.

The Seventh Circuit then went on to agree with the District Court’s critique of  expert opinion offered by NCR to estimate the percentage of mass it contributed to OU-4, but faulted the District Court for failing to explain why it rejected an alternative approach to estimating mass-percentages.  The Seventh Circuit did not say whether the estimated mass-percentages, if properly done, would have proven that the harm in OU-4 was “theoretically” capable of apportionment.  Instead, the Seventh Circuit reversed the District Court’s rejection of the divisibility defense and remanded for further fact finding.

As to Glatfelter, the Seventh Circuit characterized its divisibility argument as an “all-or-nothing game,” in the sense that Glatfelter argued that none of its PCBs made their way into OU-4, obviating the need, in Glatfelter’s view, to approximate its share of the PCB contamination in OU-4.  The Seventh Circuit thoroughly analyzed the testimony of Glatfelter’s expert (to the point of proposing complex algebraic formulas to demonstrate his testimony was unsound), concluding “Glatfelter failed to prove that the PCB discharges for which it is responsible were not a sufficient, or at least a necessary cause of at least some of the contamination in OU-4.  Therefore, the district court correctly ruled against Glatfelter on its all-or-nothing divisibility defense.”

So what do Superfund practitioners learn from Glatfelter?  Some things we already understood are confirmed.  Divisibility analysis is a two step process; the initial and far more challenging step is to prove that the harm is “theoretically” capable of apportionment.  The burden of proof on that issue rests with a defendant advancing a divisibility of harm defense.  Glatfelter now instructs that the test to determine whether a harm is theoretically capable of apportionment depends upon the extent to which the defendant contributed to concentrations of contaminants at the site, an obvious subject for expert testimony.  The battle on that issue can be expected to resume in the District Court.  To the extent the first step is cleared, a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.  

More than theoretical is the fact the Fox River Site will produce more opinions for guidance to Superfund practitioners in this confusing and difficult area of the law. 

CERCLA Contribution; The Confusion Continues

Posted on February 28, 2014 by William Hyatt

In the words of Justice Thomas in United States v. Atlantic Research Corp., the Circuit Courts have “frequently grappled” with the interplay between Sections 107(a) and 113 of CERCLA. These are the two provisions of the Statute that enable “covered persons”, commonly referred to as potentially responsible parties or “PRPs”, to recover response costs from other PRPs. In Atlantic Research, the Court held that Section 107(a)(4)(B) provides PRPs with a cost recovery cause of action; whereas, Section 113 provides PRPs with two separate contribution claims. One right to contribution exists under Section 113(f)(1) but, according to the Court in Cooper Indus., Inc. v. Aviall Servs., Inc., only “during or following” a Section 106 or 107 enforcement action. The second contribution remedy is found in Section 113(f)(3)(B) for a PRP who has “resolved its liability” for some or all of a response action or for some or all of the costs of such an action in a consent decree or an administrative order on consent (“AOC”). The Court, in Atlantic Research, explained that Section 107(a) allows a PRP to recover costs that it has itself incurred from other PRPs; whereas, the Section 113 contribution remedies allow a PRP to recover amounts it has paid to reimburse others who have actually incurred the costs. These distinctions would seem clear enough, but the lower courts have struggled to apply them.

At least part of the explanation for that struggle can be traced to the statement of the Court in Atlantic Research, that “[w]e do not suggest that 107(a)(4)(B) and 113(f) have no overlap at all,” citing the case where a PRP incurs its own costs pursuant to a consent decree following a Section 106 or 107 suit:

“In such a case, the PRP does not incur costs voluntarily, but does not reimburse the costs of  another party. We do not decide whether these compelled costs of response are recoverable  under 113(f), 107(a), or both.” (emphasis added).

In Bernstein v. Bankert, the Seventh Circuit resolved that issue, ruling, consistently with most other Circuit Courts, that after Atlantic Research, a plaintiff cannot pursue a cost recovery claim when a contribution claim is available. Thus, CERCLA plaintiffs cannot have “both,” as the Atlantic States footnote had suggested might be the case. For many Superfund practitioners, however, much of the rest of the amended panel decision in Bernstein appears to be novel.

The plaintiffs in Bernstein entered into two AOCs with EPA under Section 113(f)(3)(B), one in 1999, the other in 2002. Under the 1999 AOC, the plaintiffs performed a study to identify a removal action to be conducted at the site. In 2000, EPA determined that the plaintiffs had successfully completed the requirements of the 1999 AOC. Plaintiffs then agreed to perform the selected removal action pursuant to a 2002 AOC. At the time of the Seventh Circuit decision, the plaintiffs were continuing to perform the work required by the 2002 AOC. Plaintiffs brought suit in 2008, seeking cost recovery and contribution from other PRPs with respect to both AOCs.

The Seventh Circuit concluded that the plaintiffs had a Section 113(f)(3)(B) contribution claim as to the 1999 AOC because they had “resolved” their liability to EPA, but the claim was barred by the statute of limitations. Plaintiffs argued that Section 113(g)(3), the statute of limitations applicable to contribution claims, contained a “gap” which should be filled by applying Section 113(g)(2), the statute of limitations applicable to removal actions, such as the work required by the 1999 AOC. The Seventh Circuit concluded that it need not resolve the “gap” argument because the claims under the 1999 AOC, filed in 2008, were barred under either Section 113(g)(2) (three years from the 2000 completion of the removal action) or Section 113(g)(3) (three years from the date of the 1999 AOC).

As to contribution claims under the 2002 AOC, the Seventh Circuit focused on the statutory phrase “resolved its liability” as a limitation on the availability of the contribution remedy under that section. Analyzing the language of the AOC (which appears to have been based upon EPA's model AOC for removal actions), the court concluded that a party “resolved its liability” when it completed the requirements of the AOC to the satisfaction of EPA, an event which had not yet occurred. Only then would EPA's “conditional covenant not to sue” the settling parties become effective. Since work in fulfillment of the requirement of the 2002 AOC was ongoing, the court held that the plaintiffs had not “resolved” their liability and therefore had no contribution claim under Section 113(f)(3)(B). Moreover, the Court concluded that a party has not “resolved its liability,” within the meaning of that provision, until “the nature, extent or amount of [the] PRP's liability” is determined, or settled at least in part with EPA. The 2002 AOC, like virtually all other AOCs entered in the Superfund program, contained a reservation of rights on the part of the settling parties to contest their liability. The Court then went on to conclude that since the plaintiffs did not have a contribution claim under Section 113(f)(3)(B), they had a cost recovery claim under Section 107(a)(4)(B) because they had incurred necessary costs of response consistent with the National Contingency Plan.

The defendants-appellees moved the Seventh Circuit for a panel rehearing of its first decision, supported by EPA as amicus. The Seventh Circuit denied reconsideration, but granted rehearing, “in part, to address some issues raised by the EPA:

Specifically, the EPA identified certain passages of our original opinion which suggested that a  party may never structure a settlement agreement with EPA in such a way as to resolve their  liability immediately upon execution of that agreement. That is not the case. A party responsible   for an instance of environmental contamination may obtain an immediately effective release  from the EPA in a settlement, or it may obtain only a performance-dependent conditional  covenant not to sue with an accompanying disclaimer of liability. Whether, and when, a given  settlement 'resolves' a party's liability is ultimately a case-specific question dependent on the  terms of the settlement before the court. In this case, the terms of the settlement did not  provide for a resolution upon entering into the agreement.

The Seventh Circuit panel interpreted Section 113(f)(3)(B) to authorize contribution actions only once a contribution plaintiff has “resolved its liability” in a settlement, but then went on to conclude that resolution of liability does not occur until the requirements of the settlement have been completed and accepted by EPA and until the liability of the PRP has been “determined.” Given the fact that response actions can take decades to complete, this reading of the statute could result in very substantial and likely unanticipated delays in the effectiveness of the covenants not to sue contained in Section 113(f)(3)(B) settlements. Moreover, the same statutory phrase, “resolved its liability,” also appears in Section 113(f)(2), the provision affording protection for settling parties against contribution claims. Before this decision, most Superfund practitioners are likely to have thought that the benefits of a settlement under Sections 113(f)(3)(B) and Section 113(f)(2) accrued when the settlement agreement was signed. Many will be surprised to learn that, at least in the Seventh Circuit, they will not enjoy those benefits until they finish the work required by their settlements and until that work is approved by EPA. Even then, they may not have those benefits if they reserved their right to contest liability, as is commonly the case in Superfund AOCs.

The interpretations of Section 113 in Bernstein appear to be contrary to commonly held understandings of Section 113 (even by EPA) and contrary to the analysis of the Sixth Circuit in RSR Corp. v. Commercial Metals Co. Therefore, many Superfund practitioners believed that such a split might motivate the Supreme Court to grant the petition for certiorari; however, the petition was denied on January 27. While EPA had served as amicus curiae in support of reconsideration of the original panel decision, EPA did not file an amicus brief in support of the petition.

The Seventh Circuit decision is surprising for several reasons:

  • Although the Seventh Circuit did not have occasion in Bernstein to analyze the impact of the phrase “resolved its liability” on consent decrees, the reasoning of the court would suggest that the benefits of Section 113(f)(3)(B) will not accrue to signatories of consent decrees until the requirements of the consent decree have been completed and accepted by EPA. Since CERCLA requires that settlements involving remedial actions be documented in consent decrees, that effectiveness could easily be delayed for many decades. In the meantime, signatories to consent decrees in the Seventh Circuit may not have contribution rights under Section 113(f)(3)(B) or contribution protection under Section 113(f)(2).
  • The Seventh Circuit reasoned that such delays could be avoided by specific language in AOCs or consent decrees, making the covenants not to sue in settlements effective immediately. This reasoning, however, would appear to overlook Section 122(f)(1) which requires that discretionary covenants not to sue contain reservations of rights for “future liability.” The reasoning also appears to overlook the fact that there are many hundreds, if not thousands, of AOCs and consent decrees that have been signed over the years which contain the same EPA “model” language found in the Bernstein AOCs. If the reasoning of the Seventh Circuit in Bernstein is followed elsewhere, those settling parties may have a major surprise awaiting them.
  • No other circuit court has interpreted Section 113(f)(3)(B) in the way the Seventh Circuit did in Bernstein. No other circuit court has placed such emphasis on the term “resolved its liability” to shift the effectiveness of settlements from the point when the settlement agreement is signed until potentially decades later.
  • The Seventh Circuit decision logically defers contribution protection, a key incentive for PRPs to settle with EPA, potentially for decades. Will settlements with EPA be more difficult to achieve in the Seventh Circuit?
  • Under Bernstein, settling parties do not obtain the benefits of Section 113 unless their liability is “determined.” Forcing settling parties to concede their liability may prove to be a major deterrent to settlements.
  • The Seventh Circuit ruled that the plaintiffs had a Section 107(a)(4)(B) cost recovery claim even though their Section 113(f)(3(B) contribution claim had not yet matured. What happens when that contribution claim matures? Do the Bernstein settling parties then lose their Section 107(a)(4)(B) claim? What statute of limitations will then apply? What standard of liability will then apply?

CERCLA is notorious for its ambiguities and lack of clarity. This decision by the Seventh Circuit will likely do little to shed light on the interplay between CERCLA cost recovery and contribution. In the meantime, settling parties in the Seventh Circuit may have different rights than settling parties in other circuits.

Another Blow to the Divisibility of Harm Defense to Joint and Several Liability

Posted on May 20, 2013 by William Hyatt

When the Supreme Court issued its 2009 decision in Burlington N. & Santa Fe RR. Co. v. United States (Burlington Northern), Superfund practitioners were encouraged to think that CERCLA joint and several liability could be avoided by arguing that the harm is divisible and therefore capable of being apportioned.  Subsequent decisions in the lower courts have dampened that encouragement.  The most recent case in point is the May 1, 2013 decision by the U.S. District Court for the Eastern District of Wisconsin in United States v. NCR Corp. (NCR Corp.), the latest in a long line of decisions involving the Fox River Superfund Site..  After an eleven day trial, the District Court permanently enjoined NCR and the other defendants to comply with a unilateral administrative order requiring them to clean up PCB-contaminated sediments in the Fox River. 

The court had previously issued a preliminary injunction to the same effect, which was affirmed by the Court of Appeals for the Seventh Circuit on interlocutory appeal.  The District Court had also held that EPA’s remedy selection was not arbitrary, capricious or otherwise unlawful and that NCR was not entitled to contribution, decisions not yet reviewed by the Court of Appeals, leaving NCR with apportionment as its best argument in the District Court to avoid having to bear the entire burden of the cleanup.

In the latest decision, the District Court rejected attempts by NCR (and the other defendants) to prove that the “harm” in one of the operable units of the Fox River was divisible and could therefore be apportioned.  The Seventh Circuit had ruled that “harm,” for this purpose, “was best defined with reference to the contamination, as set forth in the government’s remediation rules.”  The District Court began its analysis of apportionment by pointing out that exceptions to joint and several liability will be “rare.”  According to the District Court, to demonstrate that the harm is divisible, a defendant bears the burden of proving two things: first, that the harm is theoretically capable of being divided, a question of law, and second, that there is a reasonable basis for an apportionment, a question of fact.  Burlington Northern, the District Court observed, involved only the second of these elements (“Yet, even though it is undeniable that Burlington Northern loosened the rules governing how a given harm might be apportioned, it did not address the key issue here, which is whether the harm is theoretically divisible in the first place” [emphasis in original]). 

Applying the analysis of Sections 433A and 875 of the Restatement (Second) of Torts, both Burlington Northern and the Seventh Circuit concluded that some harms will not be theoretically capable of apportionment.  Thus, if one of the causes is “sufficient” in and of itself to bring about the result, the harm will not be divisible and apportionment will not be appropriate.  The question is “whether one polluter should be considered such a significant cause of the harm that the harm attributable to that cause is incapable of being divided.”  Further, some kinds of harms will simply be unsuitable for divisibility by their very nature, as when a chemical is deemed to be harmful when it “surpasses a certain amount” or when a chemical becomes harmful only when mixed with other chemicals. 

It is interesting that the courts continue to follow the Second Restatement even though there is a more recent Third Restatement of Torts (2000).  While the courts have not provided any basis for their continued reliance on the Second Restatement, some commentators have opined that the Third Restatement can be read as trending away from joint liability and encouraging apportionment.

The District Court observed that whether a harm is theoretically capable of apportionment, although a question of law, is heavily dependent upon the underlying facts.  In this case, after an exhaustive review of the evidence, the District Court concluded that NCR had not met its burden of rebutting the government’s contention that the NCR discharges were a “sufficient cause” of the harm.  The District Court defined the “harm” as contamination in the sediments above 1 ppm of PCBs.  The Court found that NCR had not meaningfully disputed that the remedy for the sediments would have been the same even if NCR had been the only contributor.  In other words, because of NCR’s discharges, the same remedial measures would have been required regardless of whether or not discharges from others had occurred.  Since NCR’s discharges would, on their own, “require roughly the same remedial measures that are now being undertaken, [NCR] could be deemed a sufficient cause of the harm.”  Under those circumstances, the District Court concluded, the harm could not be deemed divisible and apportionment would be inappropriate.  

The District Court then went on to conclude that joint and several liability should attach even if NCR had not been a “sufficient cause” of the harm, “so long as the party is necessary to the harm.”  Thus, for example, if one party’s discharge produces a concentration below action levels, such that it is not a “sufficient cause” of the harm, when that discharge is combined with other discharges that cause the concentration to exceed the action level, the first discharge is a “necessary” cause and joint and several liability should attach.

The District Court concluded that the “harm” was not theoretically capable of apportionment, thereby avoiding the necessity of determining how apportionment might be accomplished.  This decision suggests that the battleground in the apportionment arena is likely to shift from how apportionment is conducted (the issue addressed by Burlington Northern) to the question of whether apportionment is appropriate in the first place.  This decision provides a useful guide for practitioners regarding how courts may evaluate this threshold question, and highlights the importance of how courts define the “harm” at issue.

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.

Is the Era of “Enforceable Guidance” Coming to an End?

Posted on February 24, 2012 by William Hyatt

Typically, EPA guidance contains a “disclaimer” that it does not impose legally binding requirements and that the agency retains the discretion, on a case-by-case basis, to adopt different approaches.  In practice, however, EPA tends to require strict adherence to its guidance as though the guidance had been adopted as a binding regulation.  State regulatory agencies have followed the same or similar patterns.  The practice avoids the notice and comment protections of the Administrative Procedure Act and its state counterparts, denies access to the courts to challenge unlawful guidance, and creates uncertainty in the regulated community. Recently, however, New Jersey has signaled what may be the beginnings of a departure from that approach. 

In January, 2012, after years of advocacy by the regulated community, the New Jersey Legislature adopted Assembly Bill No. 2464, which prohibits the use of guidance documents that have not been adopted as rules, unless the guidance is posted on the agency’s website.  On January 17, 2012, Governor Christie signed A. 2464 into law.  P.L.2011, c.215 (N.J.S.A. 52:14B-3a).  Under the bill, even published guidance cannot impose new or additional requirements not spelled out in state or federal law or rules that the guidance is intended to clarify.  Most importantly, guidance not promulgated as a rule cannot be used as a substitute for state or federal law or rules for enforcement purposes.

This issue came to a head when the N.J. Department of Environmental Protection adopted rules implementing the recently enacted Site Remediation Reform Act, N.J.S.A. 58:10C-1 et seq. (SRRA), best known for creating a licensed site remediation professional program. The rules explicitly made NJDEP guidance enforceable.  That guidance, which contained a number of provisions the regulated community thought were extreme, had not undergone the notice and comment process required by the state APA. 

Now, NJDEP finds itself in an awkward position, having adopted rules which run counter to the newly adopted statute and having relied on the enforceability of its guidance to implement the SRRA.  As of this writing, the agency has not publicly disclosed how it intends to cope with this awkwardness.  It will be interesting to see whether Congress and the legislatures in other states follow the lead of A. 2464.

Nexus Under the N.J. Spill Compensation and Control Act

Posted on September 3, 2011 by William Hyatt

Many practitioners, along with the New Jersey Department of Environmental Protection, assumed, until recently, that the standard of liability under the New Jersey Spill Compensation and Control Act (Spill Act) was more liberal than the comparable standard under the federal analogue, CERCLA.  A recent decision of the Appellate Division of the New Jersey Superior Court, however, appears to have called that assumption into question.  New Jersey Department of Environmental Protection v. Dimant.

The case involved a fairly classic fact pattern in which PCE ground water contamination could have been caused by a number of different dry cleaning establishments.  The relevant provision of the Spill Act provides that “any person who has discharged a hazardous substance, or is in any way responsible for any hazardous substance, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs no matter by whom incurred.”  After a bench trial, the lower court ruled that the State “had not proved a nexus between a discharge by [the only remaining] defendant and the contamination” and dismissed the complaint.  The State sought to amend its complaint to assert direct claims against several third-party defendants, but the trial court ruled it was too late. 

 
 On appeal, the State argued that under the language of the Spill Act, “a direct causal connection between the discharge and the damages need not be established.”  In making this argument, the State relied on the language of CERCLA, which the State claimed “requires no direct causal connection between a defendant’s release or threatened release of hazardous substances and the plaintiff’s incurrence or response costs” and the earlier admonition of the State Supreme Court that even parties remotely responsible for causing contamination are liable under the Spill Act.  The Appellate Division found the State’s reliance on CERCLA to be “misplaced,” on the ground that CERCLA case law still requires a connection between a release of a hazardous substance and the incurrence of response costs.  The Court noted that Spill Act case law, up until then, had focused on the connection between the discharger and the offending discharge, and that “[a]lthough none of the Spill Act cases expressly state the necessity for further proving a ‘nexus’ between a discharge and damages resulting from the contaminated discharge, such a requirement is implicit in these holdings.”  The Court found support for that conclusion from the statutory definition of the term “discharge,” which “refers to resultant damage[s].”  The Court then held that “[a]s is plain from that definition, some nexus between the use or discharge of a substance and its contamination of the surrounding area is needed to support a finding of Spill Act liability.”

A subsequent Appellate Division decision followed the reasoning of Dimant. Voellinger v. Electro-Coatings, Inc.; See also, Magic Petroleum Corp. v. ExxonMobil Corp.

These decisions would appear to make it more challenging for the State to obtain liability judgments under the Spill Act, especially in those common cases where tracing the contamination back to its source is problematic.  That challenge is avoided under CERCLA, under which the government need only prove a nexus between the covered person and the facility from which there is a release, and a separate nexus between the release (not the covered person or the covered person’s hazardous substances) and the incurrence of response costs.

Liability Under State Law After BNSF

Posted on February 23, 2011 by William Hyatt

As we all know by now, in Burlington Northern and Sante Fe Railway Co. v. United States, decided in May, 2009 (BNSF I), the Supreme Court surprised us yet again by interpreting CERCLA differently than the lower courts and Superfund practitioners had come to understand the statute to mean. The Court held (a) that “arranger” liability under Section 107(a)(3) of CERCLA is triggered only if there is an intent to dispose of hazardous substances, and (b) that joint and several liability under CERCLA may be avoided if there is a reasonable basis for apportioning harm among the “covered persons,” affirming divisibility on facts that most practitioners would not have expected to prevent joint and several liability. Since then, the lower courts have been wrestling with the application of these rulings under CERCLA. Meanwhile, however, the state courts have begun to address these issues under state law counterparts to CERCLA. Recently, the Supreme Court of Montana did just that. State of Montana v. BNSF Railway Co. (BNSF II)


Montana, like many other states, has its own version of CERCLA, called the Comprehensive Environmental Cleanup and Responsibility Act (“CECRA”). CECRA has its own categories of liable parties, including a broad class of “arrangers,” but unlike CERCLA, explicitly provides for joint and several liability. These differences result in greater potential exposure for defendants in hazardous waste cases.
 

BNSF II involved three adjoining properties north of Kalispell, MT, all of which had been listed as state Superfund sites. One of the sites, called the Reliance site, was a former crude oil refinery. BNSF transported petroleum products into and out of the Reliance site, using railroad cars that sometimes leaked badly. The trial court found that “[r]efinery workers occasionally ‘got a soaking’ when unloading crude oil” from BNSF railcars and that “when shipments of crude oil arrived and the holding tanks were full, the crude oil was dumped onto the ground in pools on BNSF property in the area.” The trial court found that BNSF “had been involved in dumping petroleum products onto the surface of the earth.”


The Montana Department of Environmental Quality (DEQ) sued seven parties, six of whom settled, with the result that a Final Unified Abatement Order was entered, holding BNSF jointly and severally liable for the Reliance site, as an “arranger” under CECRA, even though the trial court made no finding that BNSF intended to release a hazardous substance at the site.


Arranger Liability


Like CERCLA, CECRA contains no definition of an “arranger.” Instead, Section 75-10-715(1)(c) of CECRA includes among the list of liable parties “a person who generated, possessed, or was otherwise responsible for a hazardous or deleterious substance and who, by contract, agreement, or otherwise, arranged for disposal or treatment of the substance or arranged with a transporter for transport of the substance for disposal or treatment,” language that differs somewhat from Section 107(a)(3) of CERCLA.


The trial court held BNSF liable as an “arranger” under CECRA because of its “involvement” with Reliance in the dumping of petroleum on the Reliance site. The trial court relied on the Ninth Circuit decision in BNSF I, adopting a broad form of “arranger” liability, and refused to reconsider its ruling when the Ninth Circuit was reversed by the Supreme Court.


The Montana Supreme Court began its review of the trial court decision by noting that Section 114(a) of CERCLA provides that nothing prevents a State from imposing additional liability beyond those imposed by CERCLA. The Court then held that “an entity need not specifically ‘intend’ to dispose of a hazardous substance for imposition of ‘arranger’ liability ” It was enough that BNSF “possessed or was otherwise responsible for the materials it shipped” and that “[a] necessary and foreseeable consequence of shipping the material was unloading the material.” Since BNSF employees moved full tank cars of crude oil to the Reliance site so Reliance employees could dump the crude oil on the ground, “BNSF participated in the unloading process which resulted in the release of the materials it possessed.” In holding that the trial court did not err in holding BNSF liable as an “arranger,” the Court set a low bar for “arranger” liability under CECRA.


Apportionment


Unlike CERCLA, which is silent as to whether or not “covered persons” are jointly and severally liable under the statute, CECRA provides, in relevant part, that “notwithstanding any other provision of law,*** the following persons are jointly and severally liable for a release or threatened release of a hazardous or deleterious substance***” .


Notwithstanding this statutory language, the trial court entered a pretrial order that once the state proved that BNSF is a liable party, “BNSF must come forward with evidence to show it was only responsible for a portion of the contamination at the site to avoid the possibility of joint and several liability for all the surface contamination.” When BNSF failed to make such a showing, the trial court held BNSF jointly and severally liable. Because BNSF had failed to prove the factual basis for apportionment, the Supreme Court declined to rule on whether apportionment would ever be possible under the statutory language. Thus, BNSF II leaves unanswered the question of whether liability can ever be apportioned under a statute that explicitly provides for joint and several liability, no matter how distinct the harms may have been.


Conclusion


As the United States Supreme Court continues to read CERCLA narrowly, state statutes, like CECRA, may become more important in the development of hazardous waste law. BNSF II may very well represent the beginning of a trend.

Practical Impacts of Burlington Northern on Multi-Party Superfund Sites

Posted on January 29, 2010 by William Hyatt

To many Superfund practitioners, United States v. Burlington Northern & Sante Fe Railway Company, __ U.S. __, 129, S. Ct. 1870 (2009) represents the latest in a series of surprises from the Supreme Court. The decision follows Cooper Industries, Inc. v. Aviall Services, Inc, 543 U.S. 157 (2004), from which we learned that the statutory words “during or following” really mean just what they say and contribution claims under the Comprehensive Response Compensation and Liability Act (also referred to as CERCLA or the Superfund statute) are only available in those limited circumstances. A few years later, in United States v. Atlantic Research Corp., 551 U.S. 128 (2007), we learned that “covered persons” (also referred to as potentially responsible parties or PRPs) under the statute may, in certain procedural circumstances, have cost recovery claims in the event they do not meet the criteria for contribution claims.   In Burlington Northern, we learned that “arranger” liability may not be as broad as we had thought it was, and that joint and several liability may not be the automatic we thought it was. It is probably fair to say that the outcome in Burlington Northern, like the outcomes in Aviall and Atlantic Research, was not intuitive to Superfund practitioners.

 

            A Superfund practitioner might have expected the Supreme Court decision in Burlington Northern to look more like the Ninth Circuit opinion it reversed (found at 502 F.3d 781), endorsing a broad reading of “arranger” liability under the statute and applying joint and several liability to all the defendants, the latter being the norm for more than 25 years since the seminal decision in United States v. ChemDyne, 572 F. Supp. 802 (S.D. Ohio 1983).

 

As with Aviall and Atlantic Research, it will probably take many years, and many decisions by the lower courts, before we fully appreciate the implications of Burlington Northern, but one thing is already clear. Defendants in multi-party Superfund sites will be contending for apportionment as the alternative to joint and several liability, if for no other reason than to avoid funding the orphan share represented by “covered persons” who can’t be found, no longer exist, or, as is more recently the case, are bankrupt. On the other hand, governments asserting cost recovery claims can be expected to continue to advocate aggressively for joint and several liability, so as to avoid having to absorb the orphan share themselves. The question is what practical impacts this battleground will have on Superfund practice at multi-party sites.

 

            Burlington Northern raises several practical questions which will have to resolved as the law and practice develop. Here are some of them.

 

Whether a defendant is entitled to apportioned liability is a fact-intensive inquiry, resolved in Burlington Northern only after a six week bench trial, and only after the district judge took four years to render a decision. Will governments be able to obtain liability judgments at the beginning of cost recovery actions, as they have typically tried to do in the past? Will Burlington Northern force more cases to go to trial? 

 

Whether liability is subject to apportionment is not likely to be decided until the end of a case, as it was in Burlington Northern. How will cost recovery defendants evaluate their chances of success in the early stages of a case? Will they feel compelled to develop a detailed record to support arguments that liability for a single harm is subject to apportionment, unlike the defendants in Burlington Northern, who limited their arguments to general denials of liability?

 

Governmental plaintiffs can be expected to insist that liability at multi-party sites is still joint and several, even after Burlington Northern. Will those governmental plaintiffs be willing to consider the litigation risk that liability may be subject to apportionment in negotiating settlements? If so, how will that litigation risk be taken into consideration?

If liability is apportioned, how will any resulting orphan shares be funded? Will EPA’s historic limitations on orphan share funding be adequate? If not, where will the funding come from? Is the Superfund tax more likely to be reinstated because of Burlington Northern?

 Will the organization of multiple “covered persons” into PRP groups be more difficult if the defendants believe they can escape liability through apportionment? How will defendants balance that possibility against the potential benefit in the form of reduced costs that might be gained by performing cleanup work themselves?

 

Will ADR emerge as the norm for dividing responsibility among defendants who believe their liability is subject to apportionment, as it has in allocating joint and several liability? What evidence will be used to apportion liability? Burlington Northern endorsed many of the same causation-related considerations as the equitable factors historically used to allocate joint and several liability; will some or all of the Gore factors still be relevant? Burlington Northern also endorsed estimations and compromises, considerations not normally found in legal determinations; how will the lower courts react to imprecise calculations of apportioned liability?

 

How will defendants argue for an orphan share? Will they seek to establish an orphan share from the bottom up (by quantifying the share of missing PRPs), or from the top down (by quantifying their own individual shares)? Whichever way defendants decide to approach the issue, they can be expected to develop the record the district judge found lacking in Burlington Northern.

 

Finally, in states whose statutes make joint and several liability explicit (e.g, the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11g(c)(1)), how will apportionment decisions be made? Will the scope of liability be different to EPA and to such states?   Under such statutes, is there no instance in which liability will be subject to apportionment, even for distinct harms?

Like Aviall and Atlantic Research before it, Burlington Northern promises to be a fertile source of future litigation.