Ninth Circuit Holds That Non-Settling PRPs Have a Right to Intervene Under FRCP 24(a)(2)

June 16, 2010

On June 2, 2010, the United States Court of Appeals for the Ninth Circuit held in United States of America v. Aerojet General Corp. 2010 WL 2179169, 9th Cir., June 2, 2010, that non-settling potentially responsible parties (PRPs) have a right to intervene in an action to approve a consent decree between settling parties and the United States Environmental Protection Agency (EPA).

The case involves groundwater contamination in the San Gabriel Basin first discovered by EPA in 1979. In 1984, the EPA designated much of the San Gabriel Basin on the CERCLA National Priorities List for investigation and cleanup. The EPA divided the region into eight “operable units.” The South El Monte Operable Unit (“SEMOU”), the operable unit at issue in this case, covers approximately eight square miles in the south central portion of the San Gabriel Basin. By March of 2002, EPA identified 67 PRPs for the contamination in SEMOU.

In 2007, 10 PRPs entered into an agreement with EPA, the state of California and the water purveyors. EPA then filed a lawsuit in the Central District of California against these settling PRPs and lodged a proposed consent decree. If approved, the consent decree would protect these settling PRPs from contribution claims by the non-settling PRPs. A group of non-settling PRPs sought to intervene in EPA’s lawsuit under Federal Rule of Civil Procedure (“FRCP”), Rule 24(a)(2) and Section 113(i) of CERCLA, 42 U.S.C. § 9613(i). Relying on a number of other district court decisions, the District Court denied the intervention and entered the consent decree the next day.

The Ninth Circuit overturned the District Court’s ruling and found that non-settling PRPs have a right to intervene. In finding that the non-settling PRPs have a right to intervene under FRCP 24(a)(2), the Ninth Circuit applied the four-part test laid out in California ex rel. Lockyer v. United States, (9th Cir. 2006) 450 F.3d 436, 440. This four-part test requires that (1) the motion be timely; (2) the applicant claims a “significant protectable interest;” (3) the disposition of the action will impede the applicant’s ability to protect that interest; and (4) the applicant’s interest is inadequately represented by the parties to the action. The Ninth Circuit held that because non-settling PRPs are potentially liable for response costs, and yet, would be precluded from seeking contribution from the settling PRPs if the consent decree is entered, the non-settling PRPs have a significant protectable interest that would be impeded if they were not allowed to intervene. Because the EPA and the settling PRPs both have an interest in having the consent decree approved, neither party can adequately represent the non-settling PRPs’ interests. Therefore, as long as a non-settling PRP timely files a motion to intervene, it has a right to intervene under FRCP 24(a)(2).

The Ninth Circuit relied upon this same reasoning in finding that non-settling PRPs have a right to intervene under Section 113(i) of CERCLA. It held that “precisely because Section 113(f)(2) cuts off the contribution right of non-settling PRPs, Section 113(i) gives them the right to intervene upon a timely application.”

While there is a split among many district courts, the Ninth Circuit’s decision follows that of both the Eighth and Tenth Circuits. Now that three separate Circuits have found that non-settling PRPs have a right to intervene, there should be less dissention between the district courts and the EPA will no longer be able to exclude non-settling PRPs from its lawsuits.

For more information on this alert, please contact the lawyers listed below:

James Dragna, Partner, 213.680.6436

Denise Fellers, Counsel, 213.680.6427

This article was originally published by Bingham McCutchen LLP.