In a matter of first impression for the Eleventh Circuit, the court recently held that parties subject to a consent decree may not file claims for cost recovery under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Instead, they are limited to filing claims for contribution under CERCLA Section 113(f). Agreeing with several of its sister circuits that have considered the issue, the Eleventh Circuit found it must deny a Section 107 remedy under these circumstances in order “[t]o ensure the continued vitality of the precise and limited right to contribution.” Solutia, Inc. v. McWane, Inc., 2012 WL 695007 at *5 (11th Cir. Mar. 6, 2012).
In 2002, the United States Environmental Protection Agency (EPA) filed a cleanup enforcement action under CERCLA against Plaintiffs-Appellants Solutia, Inc. (“Solutia”) and Pharmacia Corporation (“Pharmacia”). In June 2003, Solutia and Pharmacia filed a lawsuit against the defendants as potentially responsible parties (PRPs) under CERCLA. Solutia and Pharmacia asserted claims for both contribution and cost recovery under CERCLA Sections 113(f) and Section 107(a), respectively. A couple of months later, Solutia and Pharmacia entered into a Partial Consent Decree to resolve the EPA’s action. The defendants sought summary judgment on the Section 107(a) claim. The Magistrate Judge initially denied the defendants’ motion, but later granted the defendants’ motions to reconsider and entered summary judgment against Solutia and Pharmacia on their Section 107(a) claim.
Solutia and Pharmacia argued that the Magistrate Judge erred because the plain language of CERCLA allows them to recover cleanup costs that they incurred directly, even if the costs were the subject of a consent decree. In rejecting that argument, the Eleventh Circuit considered two recent United States Supreme Court decisions and the structure of CERCLA remedies. First, the court looked to United States v. Atlantic Research Corp., 551 U.S. 128, 139, 137 S. Ct. 2331, 2338 (2007), wherein the Supreme Court explained that cleanup costs incurred voluntarily and directly by a party are recoverable only under Section 107(a), which imposes joint and several liability on CERCLA defendants. The court compared that to the case where a person is forced to reimburse another party for its cleanup costs, such as pursuant to a legal judgment or settlement under CERCLA. In that situation, a person may only seek contribution for its costs under Section 113(f). Cooper Indus., Inc. v. Aviall Services, Inc., 543 U.S. 157, 166, 125 S. Ct. 577, 583 (2004). Furthermore, the court noted that contribution under Section 113(f) is premised on the common law concept that the tortfeasor-plaintiff “paid more than his or her proportionate share” such that allocation according to fault between the two parties is appropriate. Atl. Research, 551 U.S. at 138. However, in Atlantic Research, the Supreme Court expressly declined to decide the precise issue raised in Solutia Inc. v. McWane, Inc.: whether a party who incurs direct cleanup costs pursuant to a consent decree after a CERCLA Section 106 or 107 lawsuit may seek to recover those costs under Section 107(a). 551 U.S. at 139 n.6.
To resolve this question, the Eleventh Circuit considered that CERCLA must “be read as a whole,” Atl. Research, 551 U.S. at 135, such that its remedies remain “clearly distinct.” Id. at 138 (internal quotation marks omitted). The court reasoned that if a party subject to a consent decree “could simply repackage its § 113(f) claim for contribution as one for recovery under § 107(a), then the structure of CERCLA remedies would be completely undermined.” Solutia, Inc., 2012 WL 695007 at *4. For example, parties could: (1) circumvent the different statutes of limitations for Section 113(f) contribution claims and Section 107(a) recovery claims; and (2) thwart Section 113(f)(2)’s contribution protection for parties who settle with the EPA. Moreover, to allow Solutia and Pharmacia to bring a Section 107(a) claim would subject the defendants to joint and several liability. However, the defendants would be barred from bringing any Section 113(f) counterclaims because Solutia and Pharmacia had entered into a judicially approved settlement with the EPA. Id. Consequently, emphasizing the “continued vitality of the precise and limited right to contribution,” the Eleventh Circuit held that Solutia and Pharmacia could not bring a Section 107(a) claim. Id. at *5 (quoting Morrison Enter., LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir. 2011)).
Since the Supreme Court decided Atlantic Research, circuit courts have fairly consistently limited claims for cleanup costs incurred pursuant to a judicial or administrative settlement to a contribution action under Section 113(f). For example, the Eighth Circuit found that Section 113 provided the exclusive remedy for a liable party compelled to incur response costs pursuant to an administrative or judicially approved settlement under Sections 106 or 107. Morrison Enter., 638 F.3d at 603; see also Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204, 229 (3d Cir. 2010) (parties subject to a consent decree cannot bring a Section 107(a) claim); Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 128 (2d Cir. 2010) (parties that settle CERCLA liability with government agencies can only bring Section 113(f) contribution claims).
In comparison, district courts have been divided as to whether claims for expenses incurred directly in response to an administrative order or consent decree may be brought under CERCLA Section 107(a). On the one hand, some district courts agree with the circuit courts that expenses incurred pursuant to a judgment, consent decree or settlement can be recovered only under Section 113(f). See, e.g., Tennessee v. Roane Holdings Ltd., 2011 WL 6258408 (E.D. Tenn. Dec. 14, 2011); ITT Indus., Inc. v. BorgWarner, Inc., 615 F. Supp. 2d 640 (W.D. Mich. 2009); Appleton Papers, Inc. v. George A. Whiting Paper Co., 572 F. Supp. 2d 1034 (E.D. Wis. 2008). However, other district courts have carved out exceptions to this rule. For instance, the district court in United States v. Pharmacia Corp., 713 F. Supp. 2d 785, 790-91 (S.D. Ill. 2010), denied Motions to Dismiss plaintiffs’ Section 107(a) claim even though the plaintiffs had been sued by the United States. The court found that the plaintiffs could pursue their Section 107(a) action for any “voluntary costs” that were: (1) incurred outside the scope of any administrative order or consent decree, and (2) not reimbursable to another party. Id. at 789; see also Ford Motor Co. v. Michigan Consol. Gas. Co., 2009 WL 3190418 at *6-8 (E.D. Mich. 2009) (court denied Motion to Dismiss plaintiffs’ Section 107(a) claims to the extent that plaintiffs sought to recover their own direct response costs, even if incurred pursuant to a state administrative order).
As the district court in Pharmacia Corp. pointed out, the Supreme Court acknowledged in Atlantic Research the “potential for overlap between Sections 107(a) and 113(f) of CERCLA.” Pharmacia Corp., 713 F. Supp. 2d at 789. For example, a party might characterize response costs incurred before any consent decree or settlement as “voluntary” and seek to recover them under Section 107(a). The same party could also try to recover subsequent settlement payments of an enforcement action under Section 113(f). Thus, although several circuit courts have now found that parties which have settled CERCLA liability with the government cannot bring Section 107(a) claims, district courts are split, and it remains to be seen whether the Supreme Court will be presented with the issue.
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This article was originally published by Bingham McCutchen LLP.