Akzo Nobel Coatings, Inc. v. Aigner Corp.: The Settlement Credit Issue Answered for CERCLA Litigation?

• Author: Amy Lewis Champagne
• Position: Recipient of the Vinson & Elkins Best Student Casenote or Comment Award, 2000-2001

Recipient of the Vinson & Elkins Best Student Casenote or Comment Award, 2000-2001, and Second Place in the 2001 Annual Environmental Law Essay Contest sponsored by the Environmental Law Section of the Louisiana Bar Association. The author extends special thanks to Professor Kenneth M. Murchison, James E. and Betty M. Phillips Professor of Law, Louisiana State University Paul M. Hebert Law Center, for his encouragement and assistance.

In Akzo Nobel Coatings, Inc. v. Aigner Corp.,¹ the United States Court of Appeals for the Seventh Circuit held Akzo liable in contribution to Aigner for costs incurred in a response action² under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").³ The court found Akzo's liability to be approximately 13% of Aigner's costs minus the amount Aigner agreed to accept from third parties in settlement.⁴ Aigner incurred the costs as the result of a consent decree it entered with the Environmental Protection Agency. In the decree, Aigner and several other responsible parties agreed to pay the costs associated with the cleanup and remediation⁵ of a hazardous waste site. Aigner and the other responsible parties also entered into a private-party settlement agreement addressing the distribution of costs of the response action.

Akzo was not a party to the settlement. Aigner then sued Akzo for contribution, claiming Akzo was also a responsible party and should bear a portion of the response costs.⁶

The Seventh Circuit applied a dollar-for-dollar credit rule to determine Akzo's contribution liability. This decision is important because the cost associated with CERCLA response actions is high.⁷The decision is also important because it is the first appellate opinion addressing the issue of the appropriate settlement credit rule in a private party's action for contribution against a non-settling responsible party under the laws of CERCLA. The confusion concerning how the non-settling party's liability should be determined exists because Congress enacted a provision under CERCLA that expressly provides for the right of contribution in the private party context, but that provision does not state how settlement agreements should affect the contribution liability of non-settling parties.⁸ Most district courts have considered either the Uniform Comparative Fault Act⁹ or the Uniform Contribution Among Tortfeasors Act¹⁰ because each Act provides a method for calculating contribution liability when there is a private party settlement. The district courts, however, are split in their holdings.¹¹

The Seventh Circuit's decision does not end the confusion because the court reversed the district court without adequately explaining its reasoning. The decision is a good one from the perspective of judicial economy and fairness, but the appellate court decision provide's little certainty in the law. Unless the United States Supreme Court decides to hear the issue, certainty will only be provided if Congress adopts a clear provision addressing this issue. This paper asserts that Congress should adopt the ruling of the United States Court of Appeals for the Seventh Circuit and explicitly declare that the non-settling party should receive a credit for the amount of the settlement. Furthermore, Congress should provide that the non- settling parties must pay an equitable percentage of the orphan shares, i.e., shares of the liability attributable to unknown or insolvent parties.¹²

Part I of this paper describes the facts and holding of Akzo Nobel Coatings, Inc. v. Aigner Corp.¹³ Part II offers background information on the law of CERCLA, the specific provisions addressing contribution rights, the jurisprudence, and the issues that remain unresolved after the Akzo decision. Part III describes the two uniform tortfeasor acts most often considered when addressing the problem of settlement credits and explains the split in the district courts' decisions. Part IV analyzes the Seventh Circuit's opinion in Akzo. Specifically, this section explores the court's rejection of the Uniform Comparative Fault Act, its use of the "federal law" argument as support for its choice of the Uniform Contribution Among Tortfeasors Act, the use of the Supreme Court's opinion in the admiralty case of McDermott, Inc. v. AmClyde,¹⁴ and the court's reading of Section 113 of CERCLA. Part V addresses the possible effects of the Seventh Circuit's decision. Part VI offers a suggested approach to solving the problem.

I The Case: Akzo Nobel Coatings, Inc. V. Aigner Corp

From 1970 to 1986, Fisher-Calo Chemicals and Solvents Corporation operated a facility where spent industrial solvents from more than two hundred companies were distilled and the residues from the distillation process were stored.¹⁵ Both the EPA and the Indiana State Board of Health investigated the site for numerous violations associated with improper handling of hazardous waste, and contamination of the soil and groundwater at the site were reported.¹⁶In 1988, the EPA conducted an investigation and feasability study of the site. Pursuant to 42 U.S.C. 105, the EPA designated the facility a Superfund site in 1993.¹⁷ The EPA then issued an administrative order to Fisher-Calo's past customers to engage in emergency cleanup activities.¹⁸ The order covered Akzo and approximately twenty other potentially responsible parties. This group agreed to implement a cost sharing and allocation plan that included a provision preventing the parties from later suing each other for the project's cost.¹⁹ Less than a year later, Akzo expressed the belief that it was only liable for contamination at part of the site and withdrew from the group.²⁰ The remaining parties, including Aigner, entered a consent decree with the EPA in 1991. The consent decree obligated them to remediate the site at a cost of $40 million and to pay the EPA $3.1 million for past cleanup expenses.²¹ Akzo was not a party to the consent decree.²²

Aigner²³ subsequently sought contribution from Akzo²⁴ for Akzo's portion of the cleanup costs that Aigner and the settling parties had incurred at the site.²⁵ The district court followed the approach of the Uniform Comparative Fault Act and held that Aigner's recovery should be reduced by the percentage of fault of the other potentially responsible parties. The court, however, read the Act to require the exclusion of any potentially responsible parties not party to the present suit. Therefore, to make up for any fault not apportioned to either party the court held that Akzo should pay approximately 13% of Aigner's total costs, even though Akzo was only responsible for 9% of the total pollutants shipped to the site.²⁶

Akzo appealed to the Seventh Circuit. It argued that the Uniform Comparative Fault Act required the court to determine the liability of all potentially responsible parties before determining the amount of Akzo's contribution liability.²⁷ The Seventh Circuit rejected both the idea of determining the fault of all parties, as well as the Uniform Comparative Fault Act's proportionate fault approach in general.²⁸The court based its rejection of the Uniform Comparative Fault Act approach on the language in Section 113(f)(1) that requires that the contribution action "be governed by Federal law."²⁹ The court stated that the Uniform Comparative Fault Act was not federal law and had only been adopted by two states.³⁰ Although no current "federal law" covered the method for determining a non-settling defendant's liability under a CERCLA contribution action, the court interpreted the requirement of Section 113(f) to mean that it must at least apply a nationally uniform law³¹ and stated that it was appropriate to borrow a state rule when the only "alternative is judicial invention."³²

The Seventh Circuit then concluded that the Uniform Contribution Among Tortfeasors Act was the preferred method of calculating Akzo's contribution liability.³³ The court supported its view by citing Section 113(f)(2) of CERCLA.³⁴ This provision governs the contribution liability of responsible parties that do not enter settlement agreements with the government. It requires that contribution from non-settling parties be reduced by the dollar amount of the settlement.³⁵ The Seventh Circuit remanded the case to the district court for determination of the actual value of settlements entered into by Aigner and other responsible parties with the instruction that Akzo should pay approximately 13% of the net of Aigner's past and future collections.³⁶

II The Law

A The Comprehensive Environmental Response, Compensation, And Liability Act

Congress enacted CERCLA³⁷ in 1980 "to provide for liability, compensation, cleanup, and emergency response for hazardous substances released into the environment and the cleanup of inactive hazardous waste disposal sites."³⁸ CERCLA accomplishes these goals by forcing those responsible for the contamination to bear the burden of remediation, an approach often referred to as an adoption of the "polluter pays" theory.³⁹ Although CERCLA does not expressly provide for joint and several liability among tortfeasors in government cleanup cases, the jurisprudence has consistently...