June 1, 2007

Supreme Court Re-opens Door to Private Cost Recovery Actions


By Chris Reive

Spring 2007

The United States Supreme Court has resolved an issue that has vexed owners of contaminated properties and their lawyers for several years — can an owner who voluntarily cleans up a contaminated site recover those costs from the entity that caused the contamination? This question has been unresolved since the Court’s landmark decision in Cooper Industries, Inc., v. Aviall Services, Inc., 542 U.S. 157 (2004) changed the landscape in this arena and put the rights of such owners in doubt. Today, the Court attempted to remove this cloud by declaring that “any person,” whether innocent or not, who “incurs costs in cleaning up a site” may sue to recover those costs from any other “so-called potentially responsible parties.” United States v. Atlantic Research Corp., 551 U.S. ____ (June 11, 2007).

The Atlantic Research case arose because, in the Cooper decision, the Court changed what the majority of lawyers and judges had believed was the law for almost twenty years by declaring that only parties which had been sued or otherwise settled their environmental liability to the Government could seek contribution from other Potentially Responsible Parties (PRPs) for those costs. Since amendment of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) by the Superfund Amendments and Reauthorization Act of 1986 (SARA), almost all United States Circuit Courts of Appeal had declared contribution to be the sole remedy of PRPs. Because CERCLA also declares that almost all owners of contaminated sites are PRPs, the Supreme Court’s 2004 decision inCooper virtually eliminated the ability of any current owner to recover cleanup costs incurred in the absence of actual litigation or settlement with the government.

Because such cleanups can result in very large bills, the Cooper decision has arguably caused PRPs to slow down in their voluntary cleanup efforts. At a minimum, it has caused PRPs to decide in such situations — “Don’t be the first to spend money on cleanup; don’t volunteer.”

Today’s decision in Atlantic Research removes this barrier to voluntary cleanups and clarifies that PRPs have recourse under CERCLA §107(a) to seek recovery of such costs from other liable parties.

The federal government had argued for a different result. It argued that CERCLA §107(a) does not create a cost recovery pathway for PRPs, and said that such an interpretation would result in “friction” in interpreting and applying the various remedies available to PRPs under the law. The Supreme Court did not agree. Instead, it said that the “plain meaning” of CERCLA could not reasonably be read to mean what the government said it meant, and Justice Thomas, writing for a unanimous Supreme Court, went to great lengths to describe and differentiate between the two “clearly distinct” remedies provided by CERCLA.

The Court also acknowledged, almost in passing, what many lawyers believe was the federal government’s real fear, which is that “…PRPs will eschew equitable apportionment under §113(f) in favor of joint and several liability under §107(a).” Long before the Cooperdecision, the government had argued, and most lower courts agreed, that joint and several liability was a remedy exclusively reserved to the government because only the government could sue under §107(a). Everyone else is a PRP. Assigning joint and several liability to any defendant is a powerful tool in litigation. Under the post-SARA and pre-Cooper cases that had limited PRPs to contribution claims, only the government retained the leverage afforded by this tool. While the Supreme Court did not expressly confront this issue, Justice Thomas acknowledged that a PRP could “…[choose] to impose joint and several liability on another PRP in an action under §107(a),” and declared in a footnote that “We assume without deciding that §107(a) provides for joint and several liability.” The result is that the litigation toolbox for PRPs has been strengthened.

The Court described the remedies of cost recovery and contribution as complementary in”[p]roviding causes of action to persons in different procedural circumstances.” How these complementary claims and remedies will play out in future litigation remains to be seen. However, a door that was once shut to owners who clean up sites contaminated by others is now open again. We can hope that the perception that such cleanups should be approached only as the result of litigation or formal government enforcement action is gone or eroding.

Tags: Business

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