Corporate Counsel
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Volume 13, No. 4
© 2005 The Metropolitan Corporate Counsel, Inc.
April 2005
CERCLA Contribution Rights After Cooper Industries
William H. Hyatt, Jr.
and Emily L. Won
KIRKPATRICK & LOCKHART
NICHOLSON GRAHAM LLP
I. Introduction:
The Cooper Industries Decision
On December 13, 2004, the United States
Supreme Court surprised the environmental
bar by holding that a private party may not sue
for contribution under Section 113(f)(1) of the
Comprehensive Environmental Response,
Cleanup and Liability Act, 42 U.S.C. § 9601
et seq. (“CERCLA,” better known as the
Superfund Act) in the absence of a prior or
pending Section 106 or 107 civil action.
Cooper Indus., Inc. v. Aviall Servs., Inc., 125
S.Ct. 577 (2004). The right to sue for contribution is a critically important element of the
CERCLA enforcement scheme because of the
typically enormous costs of remedial action
and the draconian liability provisions of the
statute, which have been interpreted by the
courts to provide for joint and several liability
unless the defendant can prove that the harm
is divisible. See, e.g., United States v. Alcan
Aluminum, 964 F. 2d 252 (3d Cir. 1992). Until
the Cooper Industries decision, parties faced
with liability for contaminated sites have
assumed that they could proceed with cleanup
without awaiting a Section 106 or 107 civil
action, relying on Section 113(f)(1) as the
source of contribution rights that could be
used to force other liable parties to pay a fair
share of the costs. Indeed, CERCLA, and particularly the 1986 SARA amendments to
CERCLA, were intended to encourage just
such voluntary action. Cooper Industries
William H. Hyatt, Jr. is a Partner and Emily L.
Won is an Associate practicing in the environment and natural resources group and resident in
the Newark, New Jersey office of Kirkpatrick &
Lockhart Nicholson and Graham LLP. Mr. Hyatt
is the firm wide environmental and natural
resources practice group coordinator. He can be
reached at (973) 848-4045. Ms. Won can be
reached at (973) 848-4054.
shattered those expectations, leaving parties
who had already undertaken voluntary
cleanup actions, or who had already sued for
contribution under Section 113(f)(1), in a
quandary.
The issue before the Supreme Court in
Cooper Industries was whether a private party
who had not been sued in a Section 106 or 107
civil action could nevertheless obtain contribution under Section 113(f)(1) from other parties who are liable under Section 107(a). The
first sentence of Section 113(f)(1), the
enabling clause, provides that contribution
suits “may” be brought by “any person”
against “any other person who is liable or
potentially liable” under Section 107(a) “during or following any civil action” under Sections 106 or 107 (emphasis supplied).
Whether the words “during or following” prescribe the exclusive circumstances under
which Section 113(f)(1) contribution is available was further complicated by the last sentence of Section 113(f)(1), the savings clause,
which provides that “[n]othing in this subsection shall diminish the right of any person to
bring an action for contribution in the absence
of a civil action under [Sections 106 or 107].”
The Supreme Court, by a vote of 7 to 2,
held that the words “during or following”
established a condition precedent to a contribution suit under Section 113(f)(1), and that
the “natural meaning” of the enabling clause
“is that contribution may only be sought subject to the specified conditions, namely ‘during or following’ a specified civil action.”
The Court went on to conclude that the word
“may” in the context of the enabling clause
“authorizes certain contribution actions –
those that satisfy the subsequent specified
condition – and no others.” All nine justices
concurred in this reading of Section 113(f)(1),
but the dissenters, in order to avoid protracting the litigation, thought that the Supreme
Court should have decided that a potentially
responsible party like Aviall Services could
recover a proportionate share of its costs pursuant to Section 107(a)(4)(B) of CERCLA,
which provides, in pertinent part, for the
recovery from the “covered persons” enumerated in Section 107(a) of “any necessary costs
of response incurred by any other person consistent with the national contingency plan.”
The majority specifically declined to address
that issue, and other issues (such as whether a
Section 106 administrative order is a “civil
action” within the meaning of Section
113(f)(1) or what the “savings clause” of Section 113(f)(1) saved), leaving the lower courts
to resolve those issues in the first instance.
II. The Immediate Impacts
Of Cooper Industries
Obviously, the most immediate and direct
impact of Cooper Industries is that parties
who have not been subjected to a Section 106
or 107 civil action will have to find support for
a contribution action somewhere other than in
Section 113(f)(1). For those parties who have
begun cleanup, or who have sued for contribution, in the absence of a Section 106 or 107
civil action, the threshold question is whether
Cooper Industries is to be applied retroactively. If it is, as seems likely, then the question is whether parties in the midst of
cleanups, or Section 113(f)(1) suits for contribution, can take steps to preserve their contribution rights.
There are also the several key issues
specifically left unresolved by Cooper Industries, such as whether Section 107(a)(4)(B)
provides an alternative route to contribution in
the absence of a Section 106 or 107 civil
action, whether there is a federal right to contribution that is “preserved” by the savings
clause of Section 113(f)(1) and whether a Section 106 administrative order qualifies as a
“civil action” under the enabling clause of
Section 113(f)(1). The lower courts will have
to grapple with these unresolved issues in the
months and years to come, further protracting
CERCLA litigation and increasing transactions costs for which CERCLA has been so
roundly criticized in the past.
Perhaps even more significant is the
dilemma faced by parties contemplating
cleanups where other parties may rightly be
charged with a share of the costs. That
dilemma is not insignificant because the vast
majority of cleanups are conducted, as intended
by CERCLA, in the absence of Section 106 or
107 civil actions, under such programs as
RCRA corrective action and the voluntary
cleanup programs in effect in many states.
Additionally, since the United States,
unlike private parties, will presumably be
immune from state contribution liability,
Please email the authors at whyatt@klng.com or ewon@klng.com
with questions about this article.
Volume 13, No. 4
© 2005 The Metropolitan Corporate Counsel, Inc.
except at federal facilities, Cooper Industries
would appear to provide the federal government with a new defense strategy to avoid
CERCLA liability, limiting its exposure in
contribution to those instances in which the
United States has instituted a Section 106
abatement action, or the United States, a state
or a tribe has sued for Section 107 cost recovery. Since these instances represent only a
small percentage of cleanup activity, Cooper
Industries has effectively narrowed the government’s contribution exposure, notwithstanding the mandate of Section 120(a) that
the United States “shall be subject to, and
comply with [CERCLA] in the same manner
and to the same extent, both procedurally and
substantively, as any nongovernmental entity,
including liability under [Section 107 of CERCLA].” The United States can effectively
limit its contribution exposure by electing to
use enforcement authorities other than civil
actions under Sections 106 and 107 (such as
Section 106 orders, RCRA enforcement
actions, etc.), something private parties do not
have the luxury of doing.
III. Contribution After Cooper Industries
All of this leaves private parties who have
contribution rights to assert, but who have not
been subjected to a Section 106 or 107 civil
action, with limited options, all of which are
complicated and lack certainty.
First, of course, a private party that has not
begun cleanup can refuse to do so until sued
under Section 106 or 107. Putting aside the
obvious fact that such a strategy would defeat
one of the essential purposes of CERCLA, to
promote prompt cleanup of hazardous sites,
other unfavorable consequences are likely to
follow from such an approach. First, the governments can recover their litigation costs,
which could be considerable. Second, the
governments might instead undertake to do
the work and sue for cost recovery, thereby
removing what might well be one of the most
attractive options for the private party, controlling costs by doing the work itself. Third,
litigation is simply unpredictable and a party
inviting the government to sue it runs the risk
that the litigation may result in unwanted surprises. Finally, such litigation sets up an
adversarial relationship between the government and the private party that may manifest
itself in ways that will increase the private
party’s costs.
Second, the private party can argue for a
right to contribution on some basis other than
the enabling clause of Section 113(f)(1).
Examples of such arguments are (a) that Section 107(a)(4)(B) provides an express or
implied right to contribution, an argument that
appears to have been accepted by at least three
of the sitting justices of the Supreme Court,
and perhaps by more; (b) that there is a federal
common law right to contribution implied in
CERCLA; or (c) that some enforcement activity qualifies as the functional equivalent of a
Section 106 or 107 civil action. For example,
parties receiving Section 106 administrative
orders may argue that such orders are “civil
actions” under Section 106, but that argument
has already been rejected by at least one district court. See Pharmacia Corp. v. Clayton
Chem. Acquisition LLC., No. 02-cv-0428MJR, (S.D. Ill. Mar. 8, 2005). The dearth of
definitive case law on any of these theories
renders them suspect as means for immediate
satisfaction.
Third, a private party can consider filing
suit pursuant to the citizen suit provisions
under the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq.
The RCRA citizen suit provision provides a
person may bring suit 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 or substantial endangerment to
health or the environment.” This provision
provides for broad substantive and procedural
relief including injunctive relief and recovery
of attorney fees but such a claim cannot be
used to recover past costs. See, e.g., Interfaith
Cmty. Org. v. Honeywell Int’l, Inc., Nos. 032760/ 3037/3585, 2005 U.S. App. LEXIS
2911 (3d Cir., Feb. 18, 2005).
Fourth, the private party can attempt to
obtain contribution through state law,
although there is a risk that state law contribution schemes may be pre-empted by CERCLA. See In re Reading, 115 F.3d 1111 (3d
Cir. 1997); Bedford Affiliates v. Sills, 156 F.3d
416 (2d Cir. 1998).
Finally, there is the option of settlements
with the United States or a state under Section
113(f)(3)(B), which provides 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 party to [such a
settlement].” On the face of this provision, in
order to qualify for contribution rights, at least
four requirements must be met: (1) there must
be at least a partial resolution of liability to the
United States or a state, (2) for some or all of
a response action or for some or all of the
costs of such an action, (3) the resolved liability must be for “response” actions or costs,
and (4) the resolution of liability must be documented in an administrative or judicially
approved settlement. Although these four
requirements would seem to be straightforward enough, the problem may well be that
EPA and its counterpart state regulatory agencies lack the resources to grind out large numbers of these documents.
Private parties should examine their preexisting settlements with EPA or states to determine if the Section 113(f)(3)(B) requirements
are met. If further clarifying language is
needed, companies should consider approaching a state or EPA to amend the settlement language. States particularly have a strong
interest in encouraging cleanups and avoiding
litigation, especially where they essentially
give nothing up. The fact that twenty-three
April 2005
state attorney generals filed an amicus brief in
support of Aviall Services’ position and urged
affirming the Fifth Circuit’s en banc decision
indicates that at least some states are sympathetic to a PRP’s right to contribution. In
addition, private parties should consult the relevant state agencies for recent pronouncements on how to handle such a settlement. For
example, at least one state, Wisconsin, has
adopted uniform provisions for inclusion in
administrative settlements, designed to satisfy
the above four criteria. See, e.g., State of Wisconsin’s Single Potential Responsible Party
Model Settlement and Multiple Potential
Responsible Party Model Settlement (available at http://www.dnr.wi.gov/org/aw/rr/general/whats_new.htm., as of March 10, 2005).
Such parties should also consider whether Section 128, added to CERCLA in 2002 as part of
the Small Business Liability and Brownfields
Revitalization Act, might result in their having
resolved their liability in states that have
entered into memoranda of agreement with
EPA under which a party’s participation in the
state’s voluntary cleanup program precludes
EPA from taking CERCLA enforcement
action.1
Behind all these potential approaches is the
possibility of a legislative fix, which could be
as simple as eliminating the words “during or
following” from the enabling clause of Section
113(f)(1), or adding the word “before” in front
of that phrase in the statutory language. Any
legislative effort will open up CERCLA to
numerous proposals for amendments, including reinstatement of the lapsed Superfund tax.
Each time CERCLA has been amended, substantial controversy has arisen over the proposed amendments and that is likely to be the
case in connection with any attempt to correct
the result of the Cooper Industries decision.
IV. Conclusion
Almost certainly, Cooper Industries has
created more doubt about the meaning of
CERCLA and will cause even more litigation
than CERCLA has generated in the past. Parties considering undertaking cleanup activities
in the absence of a Section 106 or 107 civil
action, or being forced to undertake such
cleanup under programs other than CERCLA,
must carefully consider what strategy will best
protect their contribution rights. Until the
lower federal courts have interpreted Cooper
Industries, and until the Supreme Court
answers the questions that it specifically
declined to resolve in Cooper Industries,
developing a comprehensive strategy will be
challenging.
1
New York, New Jersey and Connecticut have not entered into
a Voluntary Cleanup Program MOA with EPA and Pennsylvania
has entered into such a MOA. See Office of Solid Waste and
Emergency Response Office of Brownfields Cleanup and Redevelopment, EPA, “States Brownfields and Voluntary Response
Programs: An Update from the States,” (Jan. 2005) (available at
http://www.epa.gov/brownfields/ pubs/st_res_prog_report.htm,
as of March 10, 2005); see also One Cleanup Program Memorandum of Agreement between Commonwealth of Pennsylvania Department of Environmental Protection and Region 3 of
the United States Environmental Protection Agency, dated
4/21/04 (available at www.dep.state.pa.us/dep/deputate/airwaste/wm/landrecy/facts/EPAMOA.htm, as of March 10, 2005).