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U.S. Supreme Court Changes the Rules for some CERCLA Contribution Claims

by Robert C. Goodman , E. Jacob Lubarsky and Jon-Erik W. Magnus

On May 24, 2020, a unanimous U.S. Supreme Court held that for a settlement to trigger a right of contribution under section 113(f)(3)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the settlement must resolve a CERCLA-specific liability – and not just environmental liabilities in general. The decision resolves a dispute among the Circuits and may have significant implications in the Ninth, Seventh, and Third Circuits, which had adopted an interpretation of CERCLA that the Supreme Court has now rejected.

CERCLA allows a private right of action for direct cost recovery, with joint and several liability, under section 107 (42 U.S.C. § 9607(a)) as well as right of contribution, where liability is allocated using equitable factors, under section 113(f) (42 U.S.C. § 9613(f)). Section 113(f)(3)(B) provides a right to contribution for parties who have settled their liability for responses costs. Lower courts have routinely held that a party must proceed with a section 113(f) contribution claim, rather than a section 107 cost recovery claim, if a contribution claim is available.

The Ninth Circuit, as well as the Third and Seventh Circuits, had held that “a non-[CERCLA] settlement agreement may form the necessary predicate for a § 113(f)(3)(B) contribution action.” Asarco LLC v. Atl. Richfield Co., 866 F.3d 1108, 1119 (9th Cir. 2017). In Guam, the Supreme Court disagreed, calling into question all contribution claims based on costs incurred in a non-CERCLA settlement. As a result, parties who previously had been limited to a contribution claim may now have the ability to assert a section 107 claim – with joint and several liability. Moreover, because some section 107 claims have a longer statute of limitations than a section 113(f) contribution claim, claims that were once thought to be time-barred may now be viable.

The underlying facts of the case relate to the Ordot Dump, a U.S. Navy-constructed dump in Guam. Built during the 1940s, the Ordot Dump received municipal and military wastes including munitions, DDT, and Agent Orange dump was used by others, including Guam, through the 1970s as the only sited and operational dump on Guam. And it was the island’s only public landfill until its closure in 2011. In 1983, the dump was added to U.S. EPA’s National Priorities List and the agency designated the Navy as a Potentially Responsible Party (“PRP”) under CERCLA. But at that time, the Navy no longer owned the dump; Guam did. Thus, EPA directed Guam to address the hazardous wastes at the dump.

In 2002, EPA brought suit against Guam under the Clean Water Act (“CWA”) claiming that untreated leachate from the dump had entered into the waters of the United States (here, the United States’ “territorial seas”). EPA directed Guam to comply with the CWA by submitting a plan to cap the dump and to eliminate the discharge of untreated leachate. In 2004, EPA and Guam entered into a consent decree that required Guam to close Ordot Dump, pay a civil penalty, and design and install a dump cover system.

Then, in 2017, Guam filed a cost recovery and contribution complaint, alleging that the United States contributed “toxic military waste … for decades” to the dump. Guam’s complaint sought relief under CERCLA sections 107 (CERCLA’s “cost-recovery” provision) and 113 (CERCLA’s “contribution” provision), alleging damages in excess of $160 million. The Navy moved to dismiss Guam’s complaint arguing that the 2004 CWA consent decree between EPA and Guam eliminated the possibility of relief under section 107 and any remaining relief available under section 113(f) was barred by the applicable three-year statute of limitations.

The D.C. Circuit held that the 2004 CWA consent decree with EPA triggered Guam’s contribution rights because it “resolved liability” under CERCLA section 113(f)(3)(B) even though the settlement itself did not expressly reference CERCLA liability. However, the D.C. Circuit went on to state that Guam’s claim was time-barred as a result of the three-year limitation period applicable to contribution claims under section 113(f). Last, the circuit court further held that Guam could not pursue a section 107 cost recovery claim because it was only entitled to a contribution claim under section 113.

The D.C. Circuit decision also highlighted circuit splits on two issues related to CERCLA contribution claims: (1) whether a non-CERCLA settlement can resolve liability under section 113(f)(3)(B); and (2) what specific language in a settlement agreement resolves this liability. The Supreme Court granted certiorari on both issues.

Writing for the Court, Justice Thomas’s relatively brief opinion resolved only the question of a right to contribution under CERCLA, holding that “[a] settlement must resolve a CERCLA liability to trigger a contribution action under section 113(f)(3)(B).” The Court rejected the United States’ view that a settlement “under another environmental statute” to perform or contribute funds to something that “might resemble” or constitute a functional equivalent of a “response action” could trigger a CERCLA contribution claim. Instead, the Court focused on what it referred to as the “anchor provision” of CERCLA section 113(f), which allows a right of contribution “during or following any civil action” under sections 106 (an action by the government) or 107 (private right of action) of CERCLA. The Court concluded that because of this anchor provision, “[a] settlement must resolve a CERCLA liability to trigger a contribution action under section 113(f)(3)(B).” And in making this determination, the Court suggests that if Guam does have a claim here it is one under CERCLA section 107.

Whether a party has a section 107 cost recovery claim or a section 113 contribution claim has serious implications for the claimant. Generally, section 107 provides a more generous statute of limitations (from three to six years based on the type of cost incurred) compared to section 113’s three-year limitation period. Further, under a section 107 cost recovery action, defendants are jointly and severally liable to the plaintiff whereas defendants subject to contribution under section 113(f) are only responsible for an allocated share based on equitable factors. The Court’s decision here will likely cause parties to reevaluate whether they should be asserting a claim for cost recovery under section 107 (if they are not doing so already). Parties will also need to evaluate whether claims that they thought were time-barred (based on 113(f)’s shorter limitations period) are now viable under section 107 – this is especially true within the Ninth, Seventh, and Third Circuits where the Supreme Court’s decision upends existing caselaw.

 


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Rogers Joseph O’Donnell provides its clients with guidance on compliance with regulatory and environmental laws that affect their business. For compliance advice or defense of claims, attorneys Robert C. Goodman, E. Jacob Lubarsky, and Jon-Erik Magnus are available to assist.

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