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PRP Contribution Claims Under CERCLAStrategies for Cost Recovery Against Other Potentially Responsible Parties

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, JANUARY 5, 2011

Today’s faculty features:

Beverlee E. Silva, Partner, Alston & Bird, Atlanta

Linda W. Tape, Partner, Husch Blackwell Sanders, St. Louis, Mo.

Glenn A. Harris, Partner, Ballard Spahr, Cherry Hill, N.J.

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CERCLA: The state of the law before Aviall and Atlantic Researchbefore Aviall and Atlantic Research

Beverlee E. SilvaAl Bi d LLPAlston + Bird LLP

404-881-4625beverlee.silva@alston.com@

How can a PRP recover its clean-up costs?p

• CERCLA provides three ways:

• Section 107(a) – provides for direct suit against other PRPs.

• Section 113(f)(1) – allows contribution action against other PRPs when the party has incurred response costs pursuant to an action

d S i 106 107under Section 106 or 107.

• Section 113(f)(3) – allows contribution action against other PRPsSection 113(f)(3) allows contribution action against other PRPs when the party has settled its liability with a State or the United States.

5

Contribution: Implied, then ExpressContribution: Implied, then Express

• No contribution right under CERCLA initially.No contribution right under CERCLA initially.

C t i li d t ib ti i ht d S ti• Courts implied a contribution right under Section 107.

• Enactment of the Superfund Amendments and pReauthorization Act in 1986 added Section 113, providing an express contribution right.

6

Courts begin “directing traffic”g g

• Enactment of Section 113 led courts to “direct traffic” b h f i i S i 107 d 113between the causes of action in Sections 107 and 113

• PRPs were directed to Section 113 even in the absence• PRPs were directed to Section 113, even in the absence of an action under Section 106 or 107.

• “Innocent parties” were sent to Section 107.

A lt PRP li it d t ti f• As a result, PRPs were limited to actions for contribution. Only innocent parties could avail themselves of Section 107.

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Most of the traffic goes to Section 113g

• PRPs could not seek joint and several liability j yagainst other PRPs; only contribution.

• Section 113 was interpreted broadly, to include costs incurred voluntarily or pursuant to a y psettlement agreement.

• Section 107 was limited to a narrow class of private parties.

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p p

The Supreme Court puts up a roadblock p p p

• The issue in Aviall:The issue in Aviall:– “Whether a private party who has not been sued under

section 106 or Section 107 of CERCLA may sec o 06 o Sec o 07 o C C ynevertheless obtain contribution under Section 113(f)(1) from other liable parties.”

• The Supreme Court answered this question with aThe Supreme Court answered this question with a “no.”

9

The Supreme Court puts up a roadblock p p p

• The Supreme Court held that, under the plain language of CERCLA a Section 113(f)(1) actionlanguage of CERCLA, a Section 113(f)(1) action may be brought “during or following” an action under Section 106 or Section 107 but not beforeunder Section 106 or Section 107, but not before.

• The United States advocated this position in its amicus brief in Aviall.

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The Supreme Court puts up a roadblockp p p

• After Aviall, a PRP could not seek contribution from h PRP i h b f i d S i 106other PRPs in the absence of a suit under Section 106 or

107.

• PRPs conducting a voluntary clean-up could not recover from other PRPs at all.

• The United States benefited from the Aviall decision; the government could effectively prevent contributiongovernment could effectively prevent contribution actions against it by not filing suit under Sections 106 or 107.

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Setting the stage for Atlantic Researchg g

• Aviall made it impossible for a PRP who voluntarily cleans up to recover from other PRPsvoluntarily cleans up to recover from other PRPs.

• This restriction of CERCLA actions was arguably at odds with the purpose of the statute.

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Atlantic ResearchAtlantic Research• Factual background: Atlantic Research Corporation

l il l d i h i h d d dvoluntarily cleaned up a site where it had conducted work for the Department of Defense, then sought recovery of its costs under Section 107.y

• The United States filed a motion to dismiss, arguing that Atlantic Research as a PRP could not bring suit underAtlantic Research, as a PRP, could not bring suit under Section 107.

• The Supreme Court disagreed, holding that there was no textual basis for limiting Section 107 relief to “innocent” parties

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parties.

Impact of Atlantic ResearchImpact of Atlantic Research

• Viewed through the lens of Aviall, AtlanticViewed through the lens of Aviall, Atlantic Research makes sense.– PRPs who clean up voluntarily now have a cause ofPRPs who clean up voluntarily now have a cause of

action against other PRPs.

• Consistent with Supreme Court emphasis on the text of CERCLAtext of CERCLA

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Impact of Atlantic ResearchImpact of Atlantic Research• Footnote 6 of the decision:

i “ d f ll i i d §– PRPs can incur costs “pursuant to a consent decree following a suit under §106 or § 107(a).”

– These compelled costs could be recoverable under Section 113(f), Section 107(a), or both. ( ),

• Not clear whether PRPs conducting clean-ups pursuant to a consent decree can sue other PRPs under Section 107 or Sectionconsent decree can sue other PRPs under Section 107 or Section 113, or both.

• Case law from the lower courts:Case law from the lower courts: – Generally finding that if a PRP meets the Section 113 criteria, that is the sole

remedy. – Part of the rationale is that such actions are equitable at heart.

15

q

Cooper Industries, Inc. v. Aviall Services, Inc. , 543 U.S. 157 (2004).United States v Atlantic Research Corp 551 United States v. Atlantic Research Corp., 551 U.S. 128 (2007).

Glenn A. Harris, Esq.HarrisG@ballardspahr.com856 761 3440856-761-3440

Cooper Industries Inc v Cooper Industries, Inc. v. Aviall Services, Inc.

543 U.S. 157 (2004).

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Cooper Industries, Inc. v. Aviall Services, Inc.

• Plaintiff, Aviall Services Inc., bought property from , , g p p ydefendant, Cooper Industries, Inc.

• Aviall later discovered environmental contamination on the property and voluntarily remediated

• Aviall brought a civil action against Cooper, seeking f C ’ it bl h f i t lrecovery of Cooper’s equitable share of environmental

response costs- One of Aviall’s several claims was ultimately brought underOne of Aviall s several claims was ultimately brought under

CERCLA section 113(f)(1)

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Cooper’s Motion for Summary Judgment

• Cooper argued that Aviall could not state a claim under p gsection 113(f)(1) because Aviall had not been sued under section 106 or 107

Di i C d d di i d h l i- District Court agreed, and dismissed the claim

- 5th Circuit Court of Appeals affirmed, then reversed the dismissal by a divided en banc panel vote y p

• The Supreme Court affirmed dismissal of the claim by the lower courts

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Supreme Court’s Holding

• Private party who has not first been sued under section 106 p yor 107 cannot seek contribution under section 113(f)(1) from other potentially responsible parties (“PRPs”) for remediation costs it incurredremediation costs it incurred

• Supreme Court based its decision on the plain language of section 113(f)(1): ( )( )- “Any person may seek contribution from any other person who is

liable or potentially liable under section 9607(a) of this title, during or following any civil action under section 9606 orduring or following any civil action under section 9606 … or under section 9607(a).” (emphasis added)

20

United States v Atlantic United States v. Atlantic Research Corp.

551 U.S. 128 (2007).

21

United States v. Atlantic Research Corp.

• Plaintiff, Atlantic Research Corp., leased property from , p , p p yUS Department of Defense

• In the course of work done for the U.S., Atlantic contaminated the site, then voluntarily cleaned it

• Atlantic brought a civil action against the US under CERCLA ti 107 t h f t i d iCERCLA section 107 to recover share of costs incurred in voluntarily cleaning up contaminated site

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U.S. Moves to Dismiss

• U.S. argued that section 107(a) does not allow PRPs (such g ( ) (as Atlantic) to recover costs - District Court granted dismissal

- 8th Circuit Court of Appeals reversed, stating that section 113(f) does not provide the exclusive route by which PRPs may recover cleanup costs

• Supreme Court affirmed judgment of the Court of Appeals

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Supreme Court’s Holding

• PRPs who have voluntarily incurred remediation costs may bring cost ti i t th PRP d ti 107( )(4)(B)recovery action against other PRPs under section 107(a)(4)(B)

• The decision harmonized section 107(a) cost recovery and 113(f) contribution: - “§ 107(a) permits cost recovery (as distinct from contribution) by

a private party that has itself incurred clean-up costs. . . . [C]osts of reimbursement to another person pursuant to a legal j d t ttl t bl l d § 113(f) ”judgment or settlement are recoverable only under § 113(f).” (emphasis added)

• While recognizing possible scenario, Court declined to decide h th t f k d t t t d d tiwhether costs of work done pursuant to consent decree under section

106 or 107 (compelled costs) are recoverable under section 113(f), 107(a), or both

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Recovery of Cleanup Costs under CERCLA §§ 107/113 Which CERCLA §§ 107/113, Which

Section Applies?

Li d W TLinda W. TapeHusch Blackwell LLP

linda tape@huschblackwell comlinda.tape@huschblackwell.com314-480-1839

25© Husch Blackwell LLP

The Post Atlantic Research World of CERCLA

• Atlantic Research clearly redefined cost recovery actions but left a number of issues open.

• Key insights from Atlantic Research for analysis of issues and cases going forward:of issues and cases going forward:

– The language of the statute is the starting point of any g g g p yanalysis.

– Sections 107 and 113 provide clearly distinct remedies that can also be overlapping.

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Section 107 Language

Section 107(a) – LiabilityThe statute sets out who is liable in § 107(a)(1)-(4) and then § ( )( ) ( )

states in §107(a)(4) to whom those parties are liable and what they are liable for:

A. To the government for all costs of a removal or remedial action not inconsistent with the NCP and,

B. To any other person for any other costs of responseincurred which costs are consistent with the NCP.

27© Husch Blackwell LLP

Section 113(f) Language

Section 113(f) “Contribution”

(1) Contribution. — Any person may seek contribution from any other person who is liable or potentially liable under §107(a) during or following any civil action under §106 or under § 107(a).

(2) Settlement. — A person who has resolved its liability to ( ) p ythe United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement.

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Section 113(f) Language, Cont’d

(3) Persons not party to settlement.

(A) ……………

(B) A person who has resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judiciallycosts of such action in an administrative or judicially approved settlement may seek contribution from any person who is not party to a settlement referred to in paragraph (2).

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Section 113(g) – SOL Provisions

(g) Period in Which Action May Be Brought. —…..

(2) i f f l f(2) Actions for recovery of costs. — An initial action for recovery of the costs referred to in section 107 must be commenced —

(A) for removal action, within 3 years after completion of the removal action, …….; and

(B) for a remedial action, within 6 years after initiation of physical on-site construction of the remedial action……

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Section 113(g) – SOL Provisions, Cont’d

(3) Contribution. — No action for contribution for any response costs or damages may be commenced more than 3 years after—3 years after

(A) the date of judgment in any action under this Act for recovery of such costs or damages, or

(B) the date of an administrative order under section 122(g) (relating to de minimis settlements) or 122(h) (relating to cost recovery settlements) or entry of a (relating to cost recovery settlements) or entry of a judicially approved settlement with respect to such costs or damages.

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Costs Clearly Recoverable Under Either §107 §113§107 or §113

Claims that must be brought under §107:g §– Costs incurred in cleanup undertaken without EPA oversight or

involvement.

Claims that must be brought under §113:– Claims against 3rd parties for government incurred costs where

the government has conducted a cleanup and sued your client for cost recovery.

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Issue: Work under an AOC and/or UAO/

For example, Berstein v. Bankert, 2010 WL 3893121 (Sept. 29 2010 S D IN)29, 2010 S.D. IN)

• The involved Consent Orders required cleanup work.• Court focused on the fact that the orders were not

voluntary and thus the Plaintiffs’ claims were in voluntary and thus the Plaintiffs’ claims were in contribution.– Orders contained covenants not to sue by U.S. upon completion

of workof work.– Two of the orders contained contribution protection provisions. – The court expressed concern that the defendants would not be

able to counter claim for contribution based on the contributionprotection in the Orders.

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Issue: Work under an AOC and/or UAO

See also: Agere Systems v. Advanced Environmental Technology, 602 F. 3d 204 (3rd Cir. 2010)

• A party may bring a §107 claim when it makes payment to a trust fund used to cleanup a site which fund was set up pursuant to a Consent Decree signed by other PRPs. Pgs. 225-227.

• A key point for the court was that Agere would be barred from bringing its claims if a §107 claim was denied because §113 was unavailable to it.

• In what is a confusing turn, the court also held that the PRPs who signed the Consent Decree to do work, and received contribution protection, could not bring a §107 claim because it would prevent the defendant from bringing a §113 claim. Pg. 228-229.the defendant from bringing a §113 claim. Pg. 228 229.

• Thus, the focus was not on the language of the statute, but on trying to juggle protecting defendants from joint and several liability under 107.

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liability under 107.

Issue: Work under an AOC and/or UAOIssue: Work under an AOC and/or UAO

Question: Did the Berstein and Agere courts fail to properly take into account the plain language of Section 107 with take into account the plain language of Section 107 with their misplaced concern for the contribution protection the Plaintiffs received in the Consent Orders?

– Nothing in 107 mandates joint and several liability. Thus, could the defendants have argued against imposition of 100% of the cleanup costs against them under 107?cleanup costs against them under 107?

– Divisibility arguments also exists.

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Issue: Work under an AOC and/or UAO

Consider: Pharmacia v. Clayton Chemical, 382 F.Supp.2d 1079 (S.D. Ill. 2005) decided shortly after Aviall but before Atlantic Research.

• The case involved contribution claims brought for costs incurred under an AOC (requiring RI/FS work) and a UAO (requiring remedial work)remedial work).

• The court found that despite the fact that the AOC contained contribution protection, because the AOC did not state that it was p ,a settlement and it used the stipulated penalties from §106 rather than §122(d)(3), it was not a settlement and thus a §113 contribution claim was dismissed.

• The court found that the UAO was not a civil action (i.e. a judicial proceeding) and thus §113 contribution claims could not be brought for costs incurred under the UAO

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brought for costs incurred under the UAO.

Issue: Work under an AOC and/or UAO

• What happens when a PRP settles in a Consent Decree with the US for EPA past costs, and undertakes work under an AOC or UAO?

– The court in U.S. v. Pharmacia, 2010 WL 1913105 (S.D. Ill. May 12, 2010) found that a §107 claim was available.

– Note that the court had held in an earlier proceeding in the same case that the Cross-Claim Plaintiffs did not have a contribution claim.

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Voluntary vs. Required Work under C t O d DConsent Orders or Decrees

• Berstein v. Bankert focused on the fact that the Consent Order signing PRPs did not undertake the work required in the orders voluntarily.

• Note that no language in §107 requires that the costs be incurred voluntarily. The court in Ashland v. Gar, 2010 WL 29273474 (D. RI. July 22, 2010) agreed when it said “clearly the focus of the Supreme Court’s analysis [in Atlantic Research] was on the type of recovery sought, not on the voluntariness of the cleanup or the innocence of that

t b i i th ti ” P * 15party bringing the action.” Pg. * 15.

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Informal Agency Agreementsg y g

Ashland v. Gar, 2010 WL 29273474 (D. RI, July 22, 2010)

• Defendants entered two Consent Decrees for work at the site with EPA. Contribution protection in the agreements did not cover claims such as those brought by Ashland for groundwater.

• Ashland’s costs incurred pursuant to an informal agreement p gwith a regulatory agency (no EPA direct civil action or administrative action) were held to be §107 claims. The court noted that the Consent Decrees the defendants entered with EPA (with the contribution protection language) did not prevent these claims. At *16.

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Work Under State Consent OrdersWork Under State Consent Orders

Cleanup costs incurred undertaking work pursuant to a state consent order.

– The Court in Niagara Mohawk v. Chevron, 596 F3d 112, 124 (2ndg , , (Cir. 2010) held that claims based on a state consent order that resolved CERLCA liability had to be filed under §113.).

– If work is done under a state voluntary cleanup program, then §107 is available. Mervis v PPG, 2010 1381671 (March 30, 2010, S. D. Ind.)., )

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Additional Issues for Discussion

• Are PRPs that bring §107 claims entitled to impose joint and several liability on third parties and thus impose the orphan share onto such third parties (defendants)?

• What happens to a PRP that pays money to a work a appe s o a a pays o ey o a operforming PRP? Can it bring a contribution claim against a 3rd PRP under § 113?

– Note that such a PRP has not incurred any of its own costs (so it has no §107 claim) and it has not been involved in a court actionaction.

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Additional Issues for Discussion

What happens when a PRP enters a Consent Decree that includes both payments to EPA for past costs p y pand requirements for the PRP to undertake work?

I thi th i th t th S C t f i • Is this the scenario that the Supreme Court was referencing regarding the overlap of §§107 and 113?

• Or is this clearly a judicially approved settlement and thus limited to §113 contribution claims?

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Additional Issues for DiscussionAdditional Issues for Discussion

• What if a private party has begun a "voluntary" p p y g ycleanup incurring significant costs and then is sued by the United States?

– Does the government lawsuit preclude the private party from pursuing a §107 claim for the pre-suit costs?

– Does the government suit enable the private party to file a § 113 for the pre-suit costs?

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Additional Issues for Discussion

• Burdens of Proof – whose burden applies when?

• At what point in litigation can a defendant who has been sued under §107 bring contribution claims against 3rd

parties?

• Should parties that are willing to do work that the government has determined needs to be performed at a site refuse to enter a Consent Decree or other settlement with the government and rather wait for a UAO to be issued so that the party can be in the best position to recover its osts nde §107?costs under §107?

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