CHAPTER 12 NEGOTIATING SETTLEMENTS UNDER CERCLA
| Jurisdiction | United States |
(May 1990)
NEGOTIATING SETTLEMENTS UNDER CERCLA
Gardere & Wynne
Dallas, Texas
TABLE OF CONTENTS
Page
I. INTRODUCTION
II. THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT AND THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT
A. The Structure of CERCLA
1. Prerequisites for Liability
2. Cleanup Options
a. Government
b. Private Parties
(1) Cost recovery
(2) Citizens Suits
3. Liability of Potentially Responsible Parties
a. Classes of Parties
b. Standard of Liability
c. Defenses
4. The Settlement Provisions of Section 122
B. Procedures for Developing Cleanup Plans
III. PRACTICAL PROBLEMS OF NEGOTIATING CERCLA SETTLEMENTS
A. Organizing PRPs
B. Obtaining Information
C. Allocating Liability
D. Controlling the RI/FS Process
E. Special Negotation Procedures of Section 122
F. Strategic Behavior Among PRPs
IV. ISSUES IN CERCLA SETTLEMENT AGREEMENTS
A. Format for Implementing Agreement: Consent Decree or Administrative Order
B. Covenants Not To Sue and Reopener Provisions
C. Contribution Protection
D. De Minimis Settlements
E. Mixed Funding
F. Other Elements
V. JUDICIAL REVIEW OF CONSENT DECREES
VI. CONCLUSION
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I. INTRODUCTION
Litigating about the cleanup of hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA" or "Superfund"), 42 U.S.C. §§ 9601 et seq., is costly, time consuming, frustrating, irritating, and often unnecessary.1 All parties have strong incentives to negotiate a settlement. The government has strong incentives to ensure that a site is cleaned up and financed by private parties. Potentially responsible parties have strong incentives to agree to clean up a site to avoid the expense of litigation and to minimize the costs of responding to the environmental problem. Nonetheless, reaching agreement on settlement has been a difficult and elusive task under CERCLA.
There have been many reasons for the difficulties in settling CERCLA suits. In part, the reasons are practical. CERCLA litigation frequently involves hundreds of actual or potential defendants. Obtaining agreement among so many parties with potentially conflicting interests is simply difficult. In part, the reasons are bureaucratic. The U.S. Environmental Protection Agency ("EPA") has had difficulty agreeing to settlements that involve partial funding by private parties and partial funding by the government. Further, EPA frequently has been unwilling to grant reasonable releases from future liability for parties that settle. Defendants understandably are looking for some assurance that they will not be sued in the future if they agree to spend money to clean up a site today. In part, the reasons are political. The early days of implementation of Superfund were marred by allegations of political involvement in cleanup decisions. Currently, the negative political attention is focused on allegations of slow progress which the Agency claims is caused by the public's unrealistic expectations of the program.
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In response to the poor record of settling CERCLA litigation, Congress, in 1986, amended CERCLA. The Superfund Amendments and Reauthorization Act ("SARA") of 1986, P.L. 99-499, added new provisions to guide the settlement process. The amendments authorize the government to provide certain substantive elements in a settlement agreement, including covenants not to sue and protection from contribution by non-settling parties. The amendments also establish new procedures intended to expedite the negotiation process.
This paper, after reviewing the structure of CERCLA, will discuss the stages at which negotiations profitably can be pursued and some of the substantive issues that are frequently encountered in negotiation of CERCLA settlement agreements. With the adoption of SARA, settlement will become an increasingly important means of resolving disputes with the government and among third parties over CERCLA cleanups.2
II. THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT AND THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT.
CERCLA was adopted in 1980, and significant amendments, the Superfund Amendments and Reauthorization Act ("SARA"), were adopted in 1986.3 The following is a brief, blackletter overview of a complex statute.4
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A. The Structure of CERCLA
1. Prerequisites for Liability
Under CERCLA, a broadly defined class of people is potentially liable for the cleanup of a site where there has been a "release" or "threat of release" of a "hazardous substance" from a "facility."5 None of these terms are a significant limitation on the scope of liability. The definition of "hazardous substance" is particularly broad and includes substances that have been designated as hazardous under a variety of federal environmental statutes.6 CERCLA does not, however, apply to the release of petroleum or its fractions.7
2. Cleanup Options
a. Government
Under CERCLA, the government has two basic mechanisms for responding to the release or threat of release of a hazardous substance.8 First, it may clean up the site itself pursuant to
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section 104 of the Act.9 The government is authorized to recoup its expenses by bringing a cost recovery action against a broadly defined group, discussed below, of "potentially responsible parties" ("PRPs").10 EPA's ability to recover its costs is subject to the requirement that the cleanup was "not inconsistent with the National Contingency Plan." The National Contingency Plan ("NCP"), promulgated by EPA, specifies the substantive and procedural requirements for a proper cleanup action.11 The NCP is the bureaucratic "bible" in the implementation of CERCLA and SARA. Additionally, EPA has published a list of the worst sites in the country, the National Priorities List ("NPL"),12 and EPA can undertake long term "remedial" actions, in most cases, only at an NPL site.13
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Second, the government, under section 106 of the Act, simply may issue an order, potentially to any person, requiring that the ordered person clean up the site herself.14 These orders are not limited to sites on the NPL. Penalties for noncompliance with the order, when sustained by the appropriate United States district court, include daily penalties of up to $25,000 per day15 and treble the final amount of the cleanup.16 Adding insult to injury, parties have only very limited ability to obtain pre-enforcement judicial review of these orders.17
b. Private Parties
(1) Cost Recovery Actions
Under section 107(a)(4)(B), private parties, including those who are themselves PRPs, that incur costs in cleaning up a site may sue potentially responsible parties to recover their costs of cleanup.18 Private cost recovery actions are not limited to clean up of sites on the NPL, and there is no requirement that the government approve a private cleanup plan.19 The only limitation is that the plaintiffs have incurred costs undertaking a cleanup that is "consistent with the National Contingency Plan." Presumably costs will be allocated among PRPs based on principles of contribution or equitable apportionment.20
(2) Citizens Suits
SARA added a new citizens suit provision to CERCLA that authorizes citizens suits for injunctive relief and civil penalties
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against any person, including the federal government, who is "alleged to be in violation of any standard, regulation, condition, requirement, or order" under CERCLA.21 Since the owner of a site with hazardous substances is under no duty to clean up the site until it receives a 106 order or otherwise enters into an agreement with EPA, it is unclear how significant this section will be.22 At a minimum, it certainly allows citizens to monitor compliance with an effective cleanup order issued by EPA.
3. Liability of Potentially Responsible Parties
a. Classes of Parties
Under section 107(a) of CERCLA, there are four classes of persons who are potentially responsible for the costs of cleanup of a facility. These PRPs include (1) the current "owner and operator" of the facility, (2) any person "who at the time of disposal of any hazardous substance owned or operated" a site, (3) persons who "arranged for disposal" of the hazardous substances that were disposed of at the site, and (4) in some cases, the persons who transported the substances to the site.23 In addition, a former owner of a site who finds out about the disposal of hazardous substances on the site after acquisition and fails to disclose the fact when transferring the property is a liable person even though he may have had no role in contaminating the property.24
The class of parties liable as "owners or operators" has been held to extend to, among others, current owners who were not involved in the disposal of the hazardous substance;25 lessors, lessees, sublessors, and sublessees;26 successor corporations;27
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parent corporations,28 lenders, inheritors, corporate directors, officers and shareholders in certain circumstances.29
b. Standard of Liability
Under CERCLA, PRP's are subject to "strict liability" for cleanup costs without regard to fault or negligence.30 Additionally, liability is "joint and several."31 Although courts have suggested the possibility of limiting liability, it is likely that any PRP will be found jointly and severally liable to the government for the entire costs of cleanup or at least for the entire costs of cleanup not addressed by other settlements.32 Allocation among PRP's comes through settlement negotiations and actions for contribution.33
c. Defenses
Section 107(b) of CERCLA provides for the basic statutory defenses of acts of God, acts of war and acts of third parties.34 These...
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