Posted on July 30, 2014 by Andrew Brown
More than thirty years after the enactment of CERCLA, basic questions relating to the liability provisions remain. These issues can become critical when attempting to apply the limitation periods set out in the statute. One of the unsettled questions is whether an Administrative Order on Consent (AOC) can give rise to the Section 107 cost recovery claim, or are the potential plaintiffs limited to a claim for contribution under Section 113. This question can loom large when trying to determine the applicable limitations period because a three-year statute of limitations applies to contribution claims, as opposed to the usually more generous limitations periods – three years for removal actions and six years for remedial actions — provided for Section 107 cost recovery claims.
The Supreme Court has addressed the relationship between Section 107 cost recovery claims and Section 113 contribution claims in two cases: Aviall Servs., Inc. v. Cooper Indus. and U.S. v. Atl. Research Corp. In Aviall, the Court held that a Section 113(f) contribution action can only be brought during or following a suit under CERCLA Sections 106 or 107, or after liability is resolved in an administrative or judicially approved settlement. In Atl. Research, the Court held any party, including a potentially responsible party (PRP), may bring a Section 107 action to recover cleanup costs but observed that Sections 107 and 113 provided distinct causes of actions that were available to PRPs depending on whether they were seeking recovery or contribution. The Court noted that it was deciding the question of whether compelled costs of response can be recovered under Section 107(a), Section 113(f), or both.
Since Atl. Research, circuit courts have not allowed cost recovery claims when a contribution claim is available. This issue was addressed recently by the Sixth Circuit Court of Appeals in Hobart Corp. v. Waste Mgmt. of Ohio. More specifically, the court considered whether the plaintiff was limited to a claim for contribution – and thus subject to the three-year limitations period – because it had entered into an AOC to prepare the Remedial Investigation/Feasibility Study. Following the lead of other circuit courts, the Sixth Circuit declined to apply a bright-line test but focused on whether under the AOC the plaintiff had resolved its liability to the government for some or all of the response costs. If so, then recovery was limited to a contribution action under Section 113. The court held the AOC had resolved the plaintiff’s liability and called attention to three specific provisions in the AOC: the release was operative upon the effective date of the AOC, contribution protection was available as of the effective date of the AOC, and the effective date was the date that the AOC was signed (rather than the date of the completion of the work).
Hobart is another reminder that litigants must evaluate their case very carefully before they assume they will have a Section 107 claim for costs incurred to satisfy the terms of an AOC. At this point, it seems clear that for many AOCs, the only available claim will be one for contribution, especially when the terms of the AOC foreclose further adjudication of legal liability. But the courts have taken on this issue on a case-by-case basis. There may be some cases, as in ITT Industries v. BorgWarner, Inc., where the AOC is found not to be a “settlement” under Section 113(f) and a cost recovery claim may exist. But until there is further guidance from the Supreme Court, the safest approach is likely to be to assume that only a Section 113 contribution claim is available to recover costs incurred under an AOC.