CHAPTER 3 CERCLA LITIGATION
| Jurisdiction | United States |
(Dec 1989)
CERCLA LITIGATION
Sherman & Howard
Denver, Colorado
TABLE OF CONTENTS
I. Introduction
II. Statutory Overview: The Different Types of CERCLA Proceedings
III. The Complexities of CERCLA
A. CERCLA Liability is Exceedingly Broad
B. Cleanup Standards Play a Central Role in the CERCLA Process
C. CERCLA Cases are Invariably Technically Complex
D. CERCLA Cases are Costly
IV. Planning the CERCLA Defense
A. The Legal Plan
B. The Technical Case
C. Dealing With Third Parties
D. The Public and Political Process
E. Insurance Issues
V. Conduct of The Litigation
A. The Administrative Trial
B. The Judicial Trial
VI. Settlement
VII. Conclusion
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I. INTRODUCTION
In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act.1 With this statute the United States witnessed a dramatic change in environmental legislation. More importantly for our purposes, it has also witnessed a dramatic change in the importance and complexity of environmental litigation. Life has not been the same since for American business.
Prior legislative approaches, aimed at air and water pollution, for example, were directed for the most part at licensing, regulating, and controlling activities which adversely impacted the environment. Enforcement actions were nothing more than routine administrative or judicial litigation. With CERCLA, however, Congress embarked on a course to clean up hazardous substances whenever and however generated, with little regard for cost — at least when private parties foot the bill.2 The statute has given governments, particularly the federal government, an unprecedented — indeed, many have argued unconstitutional3 — arsenal of litigation weapons, while leaving persons responsible for
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environmental problems very few defenses.
CERCLA has given rise to a host of legal issues: its retroactive effect; the statutory judicial review standard; joint and several liability; an atrophied causation requirement; the technical, legal, and common sense validity of extraordinarily expensive remedial decisions; and many others. But the purpose of this paper is not to serve as a primer on CERCLA legal issues. Rather, it addresses the practical problems which the lawyer and the client face as they work through a CERCLA case.
This paper addresses the unique aspects of CERCLA litigation, from the defense lawyer's perspective. To cut down its complexity as much as possible, we have focused upon CERCLA litigation with the government, and not litigation solely between private parties.4
The paper is organized to follow the course of our thinking in a typical CERCLA representation. We first address the law — CERCLA's nightmarishly broad liability scheme and convoluted procedural settings. Our next sections discuss why CERCLA litigation requires a unique approach by the defense lawyer — its focus on a multiplicity of liable parties, strict and joint and several liability, and cleanup standards. We then turn to the legal, technical, "political," and insurance planning necessary to prepare a case for administrative proceedings or for trial. How to conduct that litigation is our next
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topic, with emphasis again on nuts-and-bolts problems and reactions. We conclude with a discussion of settlement issues and approaches.
II. STATUTORY OVERVIEW: THE DIFFERENT TYPES OF CERCLA PROCEEDINGS
CERCLA "litigation" usually is not litigation in the ordinary sense. For the most part, it is an administrative process which is generally subject to limited "judicial review." Indeed, it is very possible that a CERCLA defendant will be forced to spend millions of dollars in cleanup expenses and be embroiled in years of proceedings before it ever sees a courtroom, and then it is in for a very summary process.
The most common type of CERCLA action is an EPA proceeding to recover its costs of responding to contamination at a site. Under Section 104(a) of CERCLA,5 the federal government is authorized to undertake its own response actions at a site. It can complete all or part of the actions — in an administrative process — using the fund created by CERCLA for this purpose,6 and then bring a federal court action under Section 107(a) of the statute7 to recover those costs (and future costs) and replenish the Superfund.
In planning and implementing a cleanup under Section 104, the government is required to conduct its activities consistent with the National Contingency Plan.8 This
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regulation sets out an administrative process, a detailed road map, which the government and others must follow to assess conditions at the site, evaluate alternative means for remediation, and select the remedy ultimately to be implemented.
As an alternative to performing the cleanup itself using Superfund money, CERCLA gives the federal government powerful tools to compel defendants to implement response actions at the site. Under Section 106(a) of CERCLA,9 the federal government may issue a unilateral administrative order to a defendant to abate pollution. Ordinarily, this order is issued after the government has selected at least a conceptual remedy based on the NCP administrative process. Judicial review is precluded in most circumstances prior to completion of a remedy unless the government brings an enforcement action.10 Failure to comply with an administrative order will subject the responsible party to treble damages, based upon the government's ultimate cleanup expense, and $25,000 per day fines.11
Another alternative available to the government is to commence injunctive proceedings in federal court to compel a private party to take cleanup actions.12 As with the unilateral administrative order, this option is reserved for situations where there is
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"imminent and substantial endangerment" to public health or welfare or to the environment from releases.13 As a practical matter, however, this is not a test which the courts have construed in a way strict enough to block most government injunctive proceedings.14
Finally, the government can and does mix these processes in a myriad of ways. It can follow the NCP process through remedy selection and then institute a federal court action seeking (1) to recover "past" costs incurred to that time; (2) a declaratory judgment that the selected remedy is not inconsistent with the NCP, so that future costs are recoverable without more15 ; and (3) an injunction under Section 106 ordering the defendant to perform that remedy. At one time, the government favored this approach. It is now incresingly utilizing the Section 106 unilateral administrative order in the midst of or separate from a remedial activity, and certainly this substantial weapon will become increasingly favored in the future.16
Highly significant to the litigator in a cost recovery action under Section 107 or in an injunctive relief proceeding under Section 106(a) is that, according to the statute, when the matter ultimately reaches federal court for review the government is entitled to judicial review limited to the administrative record.17 Furthermore, the statute directs that
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the agency action should be sustained unless the defendant can show, on that record, that the agency's decision was arbitrary and capricious.18
Thus, the decisive component of CERCLA "litigation" in these contexts, at least, is an administrative process. Under CERCLA, responsible parties are compelled to implement or pay for response costs and remedial actions costing millions of dollars in what amounts to an informal agency rulemaking. There usually will be no opportunity for cross-examination of the government's witnesses, and critical decisions will be made by an agency employee, not an impartial fact finder. From a litigation perspective, the record will be replete with hearsay, ex parte communications, and other materials which judicial litigation or even an administrative contested case proceeding would find offensive. That is federal CERCLA litigation.19
The federal government is not the only plaintiff which can bring a CERCLA action. States, Indian tribes, and private parties can also initiate certain types of proceedings under the statute.20 But Congress has given significantly more power to the federal government than to states or others. Only the federal government can obtain a
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federal court injunction under CERCLA.21 Only the federal government can issue an administrative injunctive order. Only the federal government, and states which have entered into cooperative agreements with the United States under Section 104(d), are empowered by CERCLA to enter onto private property and implement cleanup action.22 A state can recover its response costs from a responsible party under § 107(a) without a cooperative agreement; it simply cannot look to the Superfund for money to conduct the cleanup, except that it may seek fund reimbursement on the same basis as a private party.23 Finally, only the federal government is entitled to record review using an arbitrary and capricious standard.24
These differences can be significant on a practical level. From an administrator's budgetary perspective, it is far easier to order (or get a court to order) a private party to conduct a remedy than it is to perform that remedy. When a state government must perform a remedy it assumes the risk, initially at least, of such things as ultimate infeasibility of the remedy, cost overruns, unforeseen circumstances, or liability for failed or inadequate remedies. Therefore, the favored approach is to select a remedy and bring a declaratory judgment action. This alleviates some but not all of this concern.
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Most significant for the litigator, however, is that when there is a non-federal plaintiff, there should be an ordinary lawsuit...
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