Albert M. Cohen1
Today, the United States Supreme Court issued an important decision which radically alters the conventional understanding of how CERCLA applies to private cost recovery actions. In Cooper Industries, Inc. v. Aviall Services, Inc., Case No. 02-1192, 543 U.S. ____ (2004), (“Cooper v. Aviall”) the Supreme Court held that a private party is not permitted to bring a cost recovery action under § 113(f)(1) of CERLCA, 42 U.S.C. § 9613(f)(1)2 unless the United States (“EPA”) or a state has taken action against it under sections 106 (42 U.S.C. § 9606) or 107 (42 U.S.C. § 9607) of CERCLA or has entered into an administrative settlement with the United States. At the same time, the Supreme Court left two very significant questions, (1) whether a private party which voluntarily complies with a § 106 order can seek contribution under § 113(f)(1) and (2) whether a private party which voluntarily incurs costs can recover under § 107(a)(1), unanswered. The decision will have a profound impact on how future environmental cost-recovery actions are handled.
Until this decision was rendered, most courts had held, and most practitioners believed, that a private party which had voluntarily incurred environmental response costs to investigate or clean up hazardous substances, could bring a private action for contribution under Section 113(f)(1), 42 U.S.C. § 9613(f)(1), against other potentially responsible parties (“PRPs”), to recover costs it had incurred and for declaratory relief for future response costs, even if neither EPA nor a state had taken action regarding the site.3 However, in Cooper v. Aviall the Supreme Court noted that Section 113(f)(1) provides that “Any person may seek contribution . . . during or following any civil action under section 9606 of [CERCLA] or under section 9607(a) of [CERCLA]” (emphasis added). The Court held that “the natural meaning of this sentence is that contribution may only be sought subject to the specified conditions, namely “during or following” a specified civil action.” The Court further noted that there is a separate right to contribution after entry into a settlement under § 113(f)(3)(B).4
The Court rejected Aviall’s argument that “the term ‘may’ should be read permissively such that ‘during or following’ a civil action is one, but not the exclusive, instance in which a person may seek contribution.” It held first that the “natural meaning of ‘may’ in the context of the enabling clause is that it authorizes certain contribution actions – ones that satisfy the subsequent condition – and no others.” It further held that if the phrase were to be read to authorize contribution actions at any time, then the phrase “during or following” would be superfluous. Finally, the Court held that the last sentence of § 113(f)(1),5 the “savings clause,” merely clarifies that “§ 113(f)(1) does nothing to ‘diminish’ any cause(s) of action for contribution that may exist independently of § 113(f)(1).” However, it “does not itself establish a cause of action; nor does it expand § 113(f)(1) to authorize contribution actions not brought ‘during or following’ a § 106 or § 107(a) civil action; nor does it specify what cause of action, for contribution, if any, exist outside of § 113(f)(1).”
The Supreme Court further held that its reading of § 113(f)(1) was supported by “the whole of § 113.” It noted that § 113 provides two express avenues for contribution, one, “during or following” specified civil actions, i.e. § 113(f)(1), and one after an administrative or judicially approved settlement that resolves liability to the United State or a State, i.e. § 113(f)(3)(B). The Court then noted that § 113(g)(3) provides two corresponding three year limitations periods for contribution actions, “one beginning at the date of judgment, § 113(g)(3)(A), and one beginning at the date of settlement, § 113(g)(3)(B).” The Court noted that “notably absent from § 113(g)(3) is any provision for starting the limitations period if a judgment or settlement never occurs, as is the case with a purely voluntary cleanup.” The Court held that the lack of such a provision “supports the conclusion that to assert a contribution claim under § 113(f), a party must satisfy the conditions of either § 113(f)(1) or § 113(f)3)(B).”
As a result, a private party can only bring a § 113(f)(1) contribution claim after:
(1) EPA or a State6 take civil action against the PRP under Section 106; or
(2) EPA or a State take civil action against the PRP under Section 107; or
(3) The private party enters into an administrative settlement with EPA or the state.
Significantly, the Supreme Court, in a footnote, specifically declined to decide whether a party which has been the subject of an administrative order under § 106 would be entitled to a contribution action under § 113(f)(1). As noted above, § 113(f)(1) only authorizes a contribution claim “during or following a civil action” (emphasis added). The United States, in an amicus brief, took the position that a party which voluntarily complied with a A7106 order was not entitled to a contribution action because the § 106 order was not a “civil action” within the meaning of § 113(f)(1). Aviall and amici argued that it would be absurd to hold that a party which refused to comply with a § 106 order and had to be sued, had a right of contribution, while a party which voluntarily complied with a § 106 order did not. The Court declined to resolve the question of whether a § 106 administrative order constitutes a “civil action” within the meaning of § 113(f)(1) because Aviall was not subject to an administrative order under § 106. Therefore, the important question of whether a private party which complies with a § 106 order is entitled to contribution under § 113(f)(1) of CERCLA remain open.7
More significantly, while the holding initially appears to be the death knell for private CERCLA actions in the absence of EPA or state involvement, the Supreme Court specifically declined to rule on the question of whether a private party can bring a § 107 action to recover costs in the absence of a § 106 or § 107 civil action brought by EPA or a state. Section 107 provides that a PRP (current owner or operator, owner or operator at time of disposal, generator or transporter) “shall be liable for . . . any other necessary costs of response incurred by any other person consistent with the national contingency plan.” In Key Tronic Corp. v. United States, 511 U.S. 809 (1994), the Supreme Court stated that “§ 107 unquestionably provides a cause of action for private parties to seek recovery of cleanup costs” and that by imposing such liability upon PRPs, it “impliedly” authorizes a party to bring a cost recovery claim under section 107. Justice Scalia, in a concurring opinion in Key Tronic, held that “Section 107(a)(4)B) states that persons are liable for certain costs ‘incurred by any other person’ (emphasis added), thus providing an express cause of action for private parties.” Key Tronic at 822.
The Supreme Court in Cooper, did note, at fn. 3, that “the cost recovery remedy of § 107(a)(4)(B) and the contribution remedy of § 113(f)(1) are similar at a general level in that they both allow private parties to recoup costs from other private parties. But the two remedies are clearly distinct.” It then, however, gave various reasons for not resolving the important issue of whether a private party which voluntarily incurs response costs may recover those costs under § 107. First, it noted that the issue was not resolved below and the Supreme Court does not ordinarily address issues in the first instance not decided below. Second, it noted that there were numerous Court of Appeals decisions holding that a private party that is itself a PRP could not pursue a § 107(a) action for joint and several liability. The Supreme Court noted that to resolve the § 107(a) question it would have to consider the validity of those decisions even though this was not briefed. The Court noted that it would also have to consider other issues not briefed such as whether Aviall could pursue a § 107 cost recovery action for some form of liability other than joint and several. The Court also refused to rely on the “dictum” in Key Tronic noted above.8 It held that “in view of the importance of the § 107 issue and the absence of briefing and decisions by the courts below, we are not prepared – as the dissent would have it – to resolve the § 107 question solely on the basis of dictum in Key Tronic.” The Supreme Court also declined to hold decide whether Aviall “has an implied right of contribution under § 107.”
Thus, although a private party may not have a right to bring a cost recovery action under section 113(f)(1), a private party may have a right to bring such an action under Section 107.9 How this issue is ultimately resolved will have a profound impact on CERLCA litigation.
In light of the foregoing, private parties must carefully consider how they proceed with investigations, clean ups and cost recovery proceedings, particularly in cases in which EPA or the State are not directly involved.
1. Cost Recovery Claims That Can Be Filed in Lieu of a CERCLA § 113 Claim
Although private parties may no longer bring CERCLA § 113 claims in the absence of § 106 and § 107 civil actions or administrative settlements, there are a variety of other claims that can be brought.
a. As noted above, the Supreme Court did not hold that a private party is barred from filing a claim under § 107 of CERCLA even if no § 106 or § 107 action has been filed. Therefore, the party should consider bringing a claim for contribution and joint and several liability under § 107(a) of CERCLA. Parties that previously filed § 113 claims should consider amending their pleadings to add § 107 claims.10
b. A private party, particularly one that anticipates to incurring significant future response costs, should consider bringing a claim for injunctive relief under the citizens suit provisions of Section 7002 of the Resource Conservation Recovery Act (“RCRA”)(42 U.S.C. § 6972) to force other PRPs to participate in the investigation or clean up. This provision permits a party to, among other things, initiate a civil action against any person “who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment.”11
c. A private party should consider bringing a claim under any state law which provides for contribution in hazardous substance cleanup cases such as the California “Superfund” law, § 25363 of the California Health & Safety Code. That provision provides that “any person who has incurred removal or remedial action costs in accordance with this chapter or the federal act may seek contribution or indemnity from any person who is liable pursuant to this chapter . . .” 12
d. A private party should consider filing suit under a state nuisance law such as California Civil Code § 3479 or § 3480;
e. A private party should consider filing suit under various other statutory or common law theories such as trespass, negligence, waste, strict liability, contribution and indemnity;
f. A private party should consider, where appropriate, bringing claims for breach of contract such as breach of a purchase and sales agreement or breach of a lease.
2. Additional Considerations
a. Where a party is involved in a site in which EPA or a State is involved, it should carefully consider whether to voluntarily incur response costs without either a suit having been filed under § 106 or § 107 or without having entered into an administrative settlement.13 If it does voluntarily incur costs, it will not have a right to recover those costs under § 113 (at least until a § 106 or § 107 “civil” action is filed).14 While it may have a right to recover costs under § 107(a), this issue has not been decided.
b. Recipients of § 106 administrative orders, the type most commonly issued by EPA, are at particular risk. As noted above, such parties may not have a right to bring a § 113 action to recover costs they incur, including from parties that refuse to comply with the order. Therefore, PRPs should be particularly careful in responding to § 106 administrative orders. Parties should consider attempting to enter into an administrative settlement to resolve the matter so that they can seek contribution under § 113.15
c. Parties that are involved in RCRA sites are also at significant risk. Thus, for example, a site owner or operator which engages in a voluntary RCRA closure would not have a right to seek contribution from prior owners, operators, generators or other PRPs under § 113.16 Similarly, a party which is sued under RCRA or receives an administrative order under RCRA, would not have a right to contribution under § 113. Therefore, parties involved in RCRA sites should consider seeking to resolve their obligations under CERCLA in order to create a right of contribution under § 113.
d. Where a party is involved in a site in which neither EPA nor a State are taking action under CERCLA, the party should consider whether or not to encourage them to take such action in order to create a right to file a § 113 claim. EPA will likely be reluctant to take on any additional sites, particularly if the site is not listed as a Federal Superfund site. Moreover, while having them take such action could provide the party with a right of action under § 113, it could also elevate the level of scrutiny that the site will receive, thereby increasing response costs and the time and effort it will take to close the site.
In sum, the Cooper v. Aviall decision has dramatically changed the way parties must approach hazardous substance investigations and cleanups. A party which voluntarily incurs response costs in the absence of a “civil action” under § 106 or § 107 or an administrative settlement may not bring a contribution action under § 113(f)(1). The questions of whether such a party has a right to cost recovery under § 107, however, remains open. All PRPs must carefully analyze how the case affects their rights when evaluating investigation and cleanup strategies.
1. Albert M. Cohen is an environmental partner at Loeb & Loeb LLP in Los Angeles. He has practiced in the Superfund area for over twenty years and filed an amicus brief in the Cooper v. Aviall case on behalf of various amici including Federal Mogul Corp., Crane Co., LFR, Inc., The Source Group, and Geomatrix Consultants, Inc.
2 Section 113(f)(1) provides, in relevant part, that “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 of this title or under section 9607(a) of this title. . . Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section 9606 of this title or under section 9607 of this title.”
3 See e.g. Bedford Affiliates v. Sills, 156 F. 3d 416, 425 (2d Cir. 1998); Pinal Creek Grp. v. Newmont Mining Corp. 118 F. 3d 1298, 1301 (9th Cir. 1997); Axel Johnson, Inc. v. Carroll Carolina Oil Co., 191 F. 3d 409, 415 (4th Cir. 1999). There were various rationale for why a party was entitled to bring a section 113 claim for contribution. Some noted that § 113 did not create any new liability, but merely confirmed “the right of a [PRP] under section 107 to obtain contribution from other [PRPs]. New Castle County v. Halliburton NUS Corp., 111 F. 3d 116, 1122 (3rd Cir. 1997); See also United Tech Corp. v. Browning-Ferris Indus., Inc., 33 F. 3d 96, 102, n. 10 (1st Cir. 1994).
4 It provides that “any 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 judicially approved settlement may seek contribution from any person who is not a party to a settlement referred to in paragraph (2).”
5 It provides “Noting in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section 9606 of this title or section 9607 of this title.”
6 Note that the action must be taken pursuant to either section 106 or 107. Thus, if a state agency takes action to require cleanup under a state law, such as the California Water Code, the party would not have a right to seek cost recovery under § 113(f)(1).
7 It does appear clear, however, that a private party which complies with an order issued under the Resource Conservation Recovery Act (“RCRA”) or voluntarily undertakes a RCRA cleanup, does have a right to contribution under § 113 unless EPA or a State initiate a civil action under § 106 or § 107 of CERCLA or enter into an administrative settlement.
8 In the dissent by Justices Ginsburg and Stevens, they noted that in Key Tronic “all Members of this Court agreed that § 107 . . . ‘unquestionably provides a cause of action for [potentially responsible persons (PRPs)] to seek recovery of cleanup costs,’” and, therefore stated in dissent that they “would not defer a definitive ruling by this Court on the question of whether Aviall may pursue a § 107 claim for relief against Cooper.”
9 Most courts which had addressed this issue had held that only “innocent” parties could bring cost recovery actions under § 107 and that responsible parties were limited to § 113 actions. See fn. 2, supra. However, they did so with the understanding that responsible parties could bring contribution actions under § 113. How they would resolve this issue in light of the Supreme Court’s ruling in Cooper is now open.
10 In Cooper, the Court noted that one issue that it was not prepared to address was whether Aviall had waived its § 107 claim.
11 This provision only allows injunctive relief but not cost recovery. See Meghrig v. KFC Western, Inc., 516 U.S. 479 (1996). Therefore, it would be most appropriate to bring a RCRA claim where a party is likely to incur additional costs in the future. In addition, if a party prefers to be in Federal court, filing a RCRA claim might be a way to obtain supplemental jurisdiction over the non-Federal claims. Still, the court may bifurcate any state court claims that are also filed.
12 See e.g. New Jersey Spill Compensation and Control Act, NJ Stat. Ann. Section 58:10, et seq. (providing that dischargers and persons who clean up and remove discharges “shall have a right of contribution against all other dischargers and persons in any way responsible for a discharged hazardous substance . . .”) and Texas Solid Waste Disposal Act, Texas Health & Safety Code Ann. § 361.344(a)(“A person who conducts a removal or remedial action that is approved by the commission and is necessary to address a release or threatened release may bring suit in a district court to recover the reasonable and necessary costs of that action and other costs as the court, in its discretion, considers reasonable. This right is in addition to the right to file an action for contribution, indemnity, or both in an appeal proceeding or in an action brought by the attorney general.”)
13 Note that while the site need not be a Superfund site in order for EPA to be involved, EPA is much more likely to be involved if it is a Superfund site.
14 Where a party enters into an administrative settlement, it is not clear whether the party is only entitled to relief with regard to the matters that were settled, or may seek declaratory relief with regard to future costs. Section 113(f)(3)(B) states that “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 judicially approved settlement may seek contribution from any person who is not a party to a settlement referred to in paragraph (2).” This could be read to permit actions as long as it has resolved liability for “some or all” of a response actions or costs. However, § 113(g)(2), which addresses § 107 actions provides that “In any such action described in this subsection, the court shall enter a declaratory judgment on liability for response costs or damages that will be binding on any subsequent action . . .” Since there is a provision which specifically allows declaratory relief for § 107 actions, but not § 113 actions, courts may hold that there is no right to declaratory relief under § 113.
15 It is not clear how EPA will approach this problem. EPA could be cooperative and enter into such agreements. On the other hand, it may see the lack of a right to contribution as a means to put additional pressure on parties which refuse to settle.
16 Such a party would have the non-§ 113 rights discussed above.
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