New Rules for Negotiating Superfund Settlements

• Jurisdiction: United States,Federal
• Citation: Vol. 24 No. 2 Pg. 307
• Pages: 307
• Publication year: 1995

24 Colo.Law. 307 Colorado Lawyer 1995.

1995, February, Pg. 307. New Rules for Negotiating Superfund Settlements

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Vol. 24, No. 2, Pg. 307

New Rules for Negotiating Superfund Settlements

by Karina M. Thomas

A recent ruling by the Tenth Circuit, in United States v. Colorado & Eastern Railroad Co., Inc., et al.,(fn1) sets out new limitations on private party cost recovery actions under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or "Superfund").(fn2) The ruling addresses two issues that have been a source of considerable uncertainty for Superfund litigants since 1986: (1) the interaction between CERCLA § 113 contribution actions and § 107 cost recovery actions and (2) the scope of protection afforded by consent decrees regarding matters addressed in private party complaints.

The Tenth Circuit's decision has immediate and far-reaching effects on Superfund litigation strategy. This article explores the impact of the Colorado & Eastern decision and identifies some issues that Superfund practitioners should consider when negotiating consent decree settlements for their clients. Readers should note that a petition for rehearing was filed in the case on December 12, 1994. It was still pending as of the time this article was printed.

Factual Background

The site at issue in Colorado & Eastern is the Woodbury Chemical site in Commerce City, Colorado. The Woodbury Chemical Company manufactured pesticides on the site from the late 1950s until 1971. Preliminary site assessments conducted by the U.S. Environmental Protection Agency ("EPA") in the 1980s revealed extensive pesticide contamination. The site was listed on the National Priorities List in September 1983.

Following further site investigation, EPA issued a Remedial Investigation/ Feasibility Study that detailed the extent of contamination and evaluated alternative cleanup approaches. A Record of Decision ("ROD") was issued by EPA in 1985, specifying the measures needed for cleaning up the site. The 1985 ROD was later revised in 1989 on the discovery of additional contamination adjacent to the original site.(fn3)

In 1989, EPA filed suit against the current and former owners and operators of the site to recover its response costs and to force parties to undertake the rest of the cleanup. Named defendants included Farmland Industries, Inc. and Colorado & Eastern Railroad Company ("CERC").

Farmland's connection with the site began in 1968, when it purchased the Woodbury Chemical Company and pesticide manufacturing plant. Several years later, Farmland sold its interest to another defendant. CERC's connection with the site began in 1984, when it purchased property adjacent to the former plant for railroad operations. The adjacent property was added to the site as of the 1989 ROD. It is undisputed that CERC itself never disposed of pesticides or chemicals on the site.(fn4)

In 1990, Farmland signed a consent decree with EPA, in which it agreed to finance and perform half of the cleanup. In addition, Farmland agreed to pay EPA $700,000 in past response costs. Farmland's consent decree expressly granted it contribution protection and allowed it to seek contribution from others as set forth in CERCLA § 113(f). Farmland specifically denied all liability in the consent decree. Cleanup was completed in June 1992, at a cost to Farmland of about $7.5 million.

In the meantime, CERC had settled with EPA by signing a consent decree in April 1992, requiring payment of $100,000 in past EPA response costs. Nearly all of the site cleanup was completed at the time settled with CERC. CERC's consent decree did not contain an express provision granting it contribution protection under CERCLA § 113(f).(fn5)

Private Party Claims

The defendants named in EPA's action filed cross-claims against each other in 1990 and 1991. All cross-claims were settled or dismissed before trial except Farmland's claims against CERC. These claims

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asserted that Farmland was forced to incur additional response costs at the site because of track-clearing activities performed by CERC employees that allegedly spread contamination around on the site. Farmland claimed these additional costs amounted to $724,058.30. CERC dismissed its claims against Farmland because it had not itself incurred any response costs and the other defendants had already settled with EPA. At the time of trial, CERC had not paid the money owed under its consent decree

Farmland's claims against CERC were brought under § 107 and, alternatively, § 113 of CERCLA. Farmland relied on § 107 so that it could impose joint and several liability against CERC for the...