United States: Better Safe Than Sorry: CERCLA Contribution Actions And The Operative Statute Of Limitations

The Comprehensive Environmental Response Compensation and Liability Act (CERCLA)¹ is a dynamic, constantly evolving area of law. Because of this, interpretations of the statute can vary drastically from jurisdiction to jurisdiction. Thus, it is imperative that practitioners are aware of how certain areas of CERCLA are interpreted in different jurisdictions across the country. One important example of a divergence in CERCLA law is whether judicially approved settlements of environmental liabilities that do not specifically resolve CERCLA liability trigger the statute of limitations for CERCLA contribution claims. The Second Circuit Court of Appeals and Third Circuit Court of Appeals have reached starkly different conclusions on this issue, and are the only two circuits to have addressed this issue. In the Second Circuit, the statute of limitations for a contribution action under Section 113(f)(3)(B) of CERCLA does not begin to run if a settlement with a state does not mention CERCLA and only resolves liability for state law claims. The Second Circuit's decision conflicts with the Third Circuit, which has ruled that the statute of limitations for a contribution action under Section 113(f)(3)(B) of CERCLA begins to run when a party settles its state law environmental cleanup liability, even if the settlement does not expressly mention and resolve CERCLA liability.

Many circuits have not addressed when judicially approved settlements trigger the statute of limitations for CERCLA contribution actions, leaving a great deal of uncertainty. Plainly, attorneys must be cognizant of this issue or face statute of limitations problems.

Background

When CERCLA originally was passed in 1980, it contained neither a contribution provision nor a statute of limitations. In 1986, Congress sought to address these omissions with the passage of the Superfund Amendments and Reauthorization Act (SARA).² SARA 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..."³ SARA further set forth a statute of limitations for CERCLA contribution claims. Under SARA, contribution claims must be filed no more than three years after the date of: 1) judgment for response costs; 2) an administrative order for de minimis settlement under Section 9622(g); 3) an administrative order for cost recovery settlement under Section 9622(h); or 4) a judicially approved settlement under Section 9622(h).⁴

The authors believe one of the problems with the way Congress drafted SARA is that it does not address whether the judicially approved settlement must resolve CERCLA liability in order to trigger the running of the statute of limitations. Likely as a result of this omission, a clear circuit split has arisen between the Second Circuit and Third Circuit regarding whether a judicially approved settlement requires resolution of CERCLA liability.

The Circuit Split

The Second Circuit has taken a restrictive view of the statute, finding that, absent a reference to CERCLA, a judicially approved settlement of environmental liabilities does not trigger the statute of limitations on a CERCLA contribution claim. In Consolidated Edison Co. of New York, Inc. v. UGI Utilities, Inc.,⁵ the Second Circuit interpreted CERCLA "to create a contribution right only when liability for CERCLA claims, rather than some broader category of legal claims, is resolved." In other words, a state settlement does not create a contribution right or trigger the corresponding statute of limitations. In Consolidated Edison, ConEd sued UGI Utilities to recover cleanup costs at several sites. ConEd alleged UGI was liable under CERCLA, as well as New York state law. The judicially approved settlement agreement at issue in the case was a voluntary cleanup agreement between ConEd and the New York Department of Environmental Conservation (NYDEC) resolving ConEd's state law liability only. In the voluntary cleanup agreement, the NYDEC agreed that if ConEd cleaned up the properties specified in the agreement, the NYDEC would furnish ConEd with a release and covenant not to sue. The release and covenant not to sue stated that the NYDEC "releases, covenants not to sue, and shall forebear from bringing any action, proceeding, or suit pursuant to the [New York] Environmental Conservation Law, the Navigation Law or the State Finance Law, and from referring to the Attorney General any claim for recovery of costs incurred by the Department... for the further investigation and remediation of the Site, based upon the release or threatened release of Covered Contamination."⁶

The Second Circuit found the language made clear that the only liability resolved under the voluntary cleanup agreement was liability for state law, not CERCLA claims. The Second Circuit held that there was no CERCLA contribution claim and, therefore, no running of the statute of limitations, because the settling party did not resolve its liability for a "response action," which the court characterized as a "CERCLA-specific term describing an action to clean up a site or minimize the release of contaminants in the future." The court further found that the statute did not begin to run because SARA's legislative history provided that Section 113 "clarifies and confirms the right of a person held jointly and severally liable under CERCLA to seek contribution...."⁷

Several years later, in W.R. Grace & Co.–Conn. V. Zotos Int'l, Inc.,⁸ the Second Circuit confirmed this ruling. In 1988, W.R. Grace & Co. voluntarily entered into an administrative order on consent with the NYDEC. The order provided: "If the [NYDEC] acknowledges that the implementation is complete...such acknowledgment shall constitute a full and complete satisfaction and release of each and every claim, demand, remedy or action whatsoever against [Grace], its officers and directors, which the [NYDEC] has or may have...."⁹ The order further stated: "Nothing contained in this [o]rder shall be construed as barring, diminishing, adjudicating or in any way affecting...(3) the [NYDEC's] right to bring any action, at law or in equity against [Grace]...with respect to areas or resources that may have been damaged as a result of the release or migration of hazardous or industrial wastes from the Site."¹⁰

The Second Circuit found this text, which made no reference to CERCLA, established that "the [NY]DEC settled only its state law claims against Grace, leaving open the possibility that the [NY]DEC or the [United States Environmental Protection Agency ("EPA")] could, at some future point, assert CERCLA or other claims."¹¹ The Second Circuit affirmed its ruling in Consolidated Edison, holding that "the operative question in deciding whether [Grace's] claims arise under 113(f)(3)(B)...is whether [Grace] resolved its CERCLA liability before bringing suit."¹² Thus, in the Second Circuit, Section 113(f)(3)(B) does not give rise to a contribution claim unless the judicially approved settlement expressly resolves CERCLA liability. The Third Circuit rejected the Second Circuit's interpretation of Section 113(f)(3)(B) in Trinity Indus., Inc. v. Chicago Bridge & Iron Co.¹³ There, Trinity and the Pennsylvania Department of Environmental Protection (DEP) entered into a consent order in 2006, whereby Trinity agreed to fund and conduct 'response actions' according to a schedule approved by the DEP. The consent order was entered into pursuant to Pennsylvania's Hazardous Sites Cleanup Act¹⁴ and Land Recycling and Environmental Remediation Standards Act.¹⁵

Trinity sought CERCLA contribution based on the order absolving it of liability under the two Pennsylvania statutes. The court held "[n]otwithstanding the rule adopted by the Court of Appeals for the Second Circuit and by various district courts...113(f)(3)(B) does not require resolution of CERCLA liability in particular."¹⁶ The court pointed to the plain language of CERCLA, finding that it "requires only the existence of a settlement resolving liability to the United States or a State 'for some or all of a response action.'"¹⁷ Further, Section 113(f)(3)(B) "does not state that the 'response action' in question must have been initiated pursuant to CERCLA—a requirement that might easily have been written into the provision."¹⁸ The court was persuaded by what it described as a lack of any plain language in Section 113(f)(3)(B) requiring a party to have settled its liability under CERCLA in particular. Thus, in the Second Circuit, in the context of judicially approved settlements, a CERCLA contribution claim arises when the settlement expressly resolves CERCLA liability. Conversely, in the Third Circuit, a judicially approved settlement of state law claims (without express reference to CERCLA) can give rise to a CERCLA contribution action, and thereby trigger the three-year statute of limitations on that claim. Therefore, it is imperative that practitioners are aware of this distinction in order to avoid having a contribution claim found to be time barred.

Potential Trends and Practical Implications

While Consolidated Edison and W.R. Grace established that, within the Second Circuit, Section 113(f)(3)(B) does not give rise to a CERCLA contribution action or trigger the corresponding statute of limitations unless the judicially approved settlement specifically resolves CERCLA liability, a later case, Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc.,¹⁹ casts some doubt on the continued viability of the prior Second Circuit cases.

In Niagara Mohawk, the court acknowledged "the Consolidated Edison/ W.R. Grace problem."²⁰ The court cited a portion of the amicus brief filed by the EPA, which it described as "understandably tak[ing] issue with our holding in Consolidated Edison[:]" "The United States was not a party to Consolidated Edison and believes it was not correctly decided...The settlement of federal and state law claims other than those provided by CERCLA fits within [Section] 113(f)(3)(B) as long as that qualifies as a 'response action...."²¹ Ultimately, the court did not resolve "the Consolidated Edison/W.R. Grace problem" because the consent order at issue explicitly encompassed CERCLA liability.

The Ninth Circuit will soon be the third federal appeals court to weigh in on this issue. In Asarco LLC v. Atlantic Richfield Co.,²² Asarco is appealing a decision by the United States District Court of Montana that Asarco waited too long to bring its CERCLA contribution claim against Atlantic Richfield.²³ On appeal, Asarco is arguing that its 1998 judicially approved consent decree with the EPA, under the Resources Conservation and Recovery Act and the Clean Water Act that made no reference to CERCLA, could not trigger the statute of limitations for Asarco's contribution claim.

Below, the district court followed the Third Circuit's approach to the triggering of the statute of limitations for contribution actions. According to the district court, "[i]f Congress intended to narrow the scope of § 113(f)(3)(B) to cover only settlements that expressly resolve CERCLA liability, it could have done so, as it did in § 113(f)(1)."²⁴ The district court concisely stated "[t]his Court agrees with the Third Circuit and the Niagara Mohawk panel."²⁵

Until this issue reaches the United States Supreme Court, lawyers practicing in any circuit need to pay careful attention to the scope of settlements that resolve environmental cleanup liability. As demonstrated by the divergence between the Second and Third circuits, there can be very different timing regarding when the statute of limitations begins to run. In deciding when to file a contribution claim, counsel should bear in mind that a wide range of cleanup activities taken pursuant to state remediation laws or other federal environmental laws (aside from CERCLA) may constitute 'response actions' under CERCLA. For example, the removal of certain types of fill from a wetland in connection with restoration activities could constitute 'response costs' under CERCLA and be subject to CERCLA's three-year statute of limitations for contribution actions if the subject of a judicially approved settlement. Ultimately, to eliminate any doubt, a prudent practitioner should consider filing their contribution action and letting the court rule on whether the claim is ripe. The expense incurred in bringing an unripe claim is far outweighed by the potential loss of an opportunity to file a contribution claim.

Footnotes

1. 42 U.S.C. § 9601, et seq.

2. See Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. at 1647–48 (codified as amended at 42 U.S.C. § 9613(f)(3)(B)).

3. Superfund Amendments and Reauthorization Act of 1986, 100 Stat. at 1648.

4. 42 U.S.C. § 9613(g)(3).

5. 423 F.3d 90 (2d Cir. 2005).

6. Consolidated Edison, 423 F.3d at 96.

7. Id. at 95-96.

8. 559 F.3d 85 (2d Cir. 2009).

9. Id. at 91.

10. Id.

11. Id.

12. Id. at 90-91.

13. 735 F.3d 131 (3d Cir. 2013).

14. 35 Pa. Stat. § 6020.101, et seq.

15. 35 Pa. Stat. § 6026.101, et seq.

16. Trinity, 735 F.3d at 136.

17. Id.

18. Id.

19. 596 F.3d 112 (2d Cir. 2010).

20. Id. at 126 n.15.

21. Id..

22. No. 14-35723 (9th Cir. 2015).

23. Asarco LLC v. Atlantic Richfield Co., 73 F. Supp. 3d 1285 (D. Mont. 2014).

24. Id. at 1292.

25. Id. at 1291.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.