CHAPTER 3 CERCLA LITIGATION: HOT TOPICS IN COST RECOVERY AND CONTRIBUTION ACTIONS

• Jurisdiction: United States

Natural Resources & Environmental Litigation II
(May 1996)
CHAPTER 3
CERCLA LITIGATION: HOT TOPICS IN COST RECOVERY AND CONTRIBUTION ACTIONS
Jill M. Hyman
Cynthia A. King
Manko, Gold & Katcher
Bala Cynwyd, Pennsylvania

Table of Contents

SYNOPSIS Page

I. Introduction

II. Statutory Overview: Elements of a CERCLA Cost Recovery Action

III. Section 107 Claims v. Section 113 Claims

IV. Successor Liability in Cost Recovery Actions

V. Inability to Recover from State as Party

VI. Ability to Recover from Municipalities

VII. Allocation Schemes

VIII. Other Potential Causes of Action

IX. Conclusion

Appendix - Hypo for Professional Responsibility and Environmental Law

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I. Introduction

In 1980, Congress passed the Comprehensive, Environmental, Compensation and Liability Act ("CERCLA")¹ as a means of cleaning up polluted sites throughout the country. The proposed CERCLA legislation was put together during the end of the Carter administration, bypassed the Senate conference procedures and was presented to the House as a quickly worked out compromise. As a result, CERCLA is widely regarded as a statute "riddled with inconsistencies and redundancies"² and "not a paradigm of clarity or precision."³ Thus, after CERCLA's initial passage many questions existed concerning issues such as the existence of private rights of action, the type of liability conferred, the availability of defenses, etc. There were many cases concerning the interpretation of the statute and, arguably, more money was spent on litigation than cleaning up polluted sites. Since that time, some of these issues were clarified during the reauthorization of CERCLA through the Superfund Amendments and Reauthorization Act in 1986 ("SARA") and in the reported case law.⁴ Nonetheless, several open issues still remain under CERCLA and there are differing resolutions of these issues among the circuit courts of appeal and among different courts within the same circuit.

This paper will first provide a general overview of CERCLA's statutory scheme and the elements of a cost recovery action. Thereafter, the "hot topics" in CERCLA litigation and the recent opinions on these issues will be discussed. To place these issues into context and illustrate how one district court decided a number of these issues, this paper references United States v. Atlas Minerals & Chemicals, Inc.,⁵ a recent CERCLA cost recovery action that is one of the few such cases to proceed

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through trial.⁶ Atlas Minerals is also the first reported case which allocated response costs among generators and transporters of industrial waste and municipal solid waste at a co-disposal landfill, i.e., it accepted waste from both businesses and surrounding municipalities. Thus, Atlas Minerals demonstrates how the issues discussed herein can effect the outcome of a case.

Factual Background of Atlas Minerals

The facility at issue in Atlas Minerals was the Oswald/Dorney Road Landfill (the "Site"). The Site was in operation from approximately 1958 through 1978 and the majority of the waste disposed at the Site was from surrounding municipalities. The Site was listed on the National Priorities List on September 21, 1984.⁷ In June 1986, EPA took control of the Site to perform a removal action. Over the next few years, EPA and the Pennsylvania Department of Environmental Resources ("DER")⁸ performed a remedial investigation/feasibility study.

Between 1990 and 1992, EPA issued three unilateral administrative orders under section 106(a) of CERCLA⁹ requiring 10 parties, the Defendants/Third-Party Plaintiffs (hereinafter "Third-Party Plaintiffs") in the action, to undertake the remedial design and remedial action set forth in the records of decision for the Site. The remedy being implemented included in impermeable cap over the landfill, regrading, groundwater monitoring, residential well monitoring and installation of household well treatment systems in certain circumstances.

In August 1991, the United States commenced a CERCLA action against the Third-Party Plaintiffs in order to recover response costs expended by the government and for a declaratory judgment for future liability. That lawsuit was settled by the entry of a consent decree. Between January 1992 and June 1993, Third-Party Plaintiffs filed third-party complaints naming approximately 60 Third-Party Defendants that had either (a) generated waste disposed of at the Site or (b) accepted waste

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for transport to the Site and selected the Site as the landfill to which the wastes were taken.¹⁰

By the time of trial, or soon after trial began, Third-Party Plaintiffs reached settlements with approximately 50 Third-Party Defendants totalling over $8 million. Trial lasted for over 50 days. The court's opinion was issued on August 22, 1995. The Atlas Minerals case is instructive in that it is one of the few CERCLA cost recovery actions that has proceeded all the way through trial and had an opinion issued which allocated response costs among several types of parties. In addition, the opinion touches upon several issues which have not yet been ruled upon by the United States Supreme Court and regarding which there are differing opinions. Thus, in discussing these issues, this paper will cite to Atlas Minerals where appropriate, also referencing the differing interpretations among the circuit courts of appeal.

Cost Recovery ActionII. Statutory Overview: Elements of a CERCLA

Elements of a Prima Facie Case

A party must prove the following elements to establish a cost recovery or contribution claim under section 107 or section 113 of CERCLA:¹¹

1. the site is a "facility";

2. from which there was a "release" or "threatened release" of a "hazardous substance";

3. which caused the plaintiff to incur response costs; and

4. Defendants fall within at least one class of responsible parties within section 107(a).¹²

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Some courts have also held that there is a fifth requirement, showing that the response costs incurred were consistent with the National Contingency Plan ("NCP"), while other courts have held that lack of consistency with the NCP is a potential defense, not an element of a prima facie case.¹³

Under CERCLA, "facility" is defined quite broadly. Any site or area can be a facility if hazardous substances were deposited, stored, disposed of, placed or otherwise came to be located on it.¹⁴ Similarly, a "release" under CERCLA is broadly defined as "any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment...."¹⁵ Under section 107(a), the mere threat of a release is sufficient to trigger liability.¹⁶ The term "environment" includes groundwater, surface waters, and land surfaces and subsurfaces within the United States.¹⁷ The term hazardous substance is broadly defined in section 101(14) to include the substances listed in six separate federal environmental statutes.¹⁸ The list of substances designated by CERCLA as hazardous is codified at 40 C.F.R. § 302.4. Waste is a hazardous substance "if it is on one or more of the lists identified at 42 U.S.C. § 9601(14) [including that codified at 40 C.F.R. § 302.4 ]... irrespective

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of the volume or concentration of the substance found at the site in question."¹⁹

With respect to the third element of a plaintiff's prima facie case, the incurrence of response costs, a party need only demonstrate that it has incurred "some" costs to establish a defendant's liability.²⁰

Section 107 of CERCLA establishes four broad classes of "covered persons" that are responsible for response costs:

(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and

(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance,...

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Covered persons falling under subsections (1) or (2) are referred to as "owners" or "operators." Covered persons falling under subsection (3) are referred to as "generators," and those falling under subsection (4) are referred to as "transporters."²¹ CERCLA imposes strict liability on these responsible parties.²²

Defenses to CERCLA Actions

Congress only provided for the assertion of a few carefully circumscribed defenses to liability under section 107 of CERCLA. Those whose liability is established by section 107 are liable, "[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section."²³ Section 107(b) permits a party to avoid liability only where both the release or threat of release of a hazardous substance and the resulting damage were caused solely by (1) an act of God; (2) an act of war; (3) an act or omission of an unrelated third party, where the defendant exercised due care with respect to the hazardous substance and took precautions against foreseeable acts of any such third-party and the consequences of those acts; or (4) a combination of these.²⁴ A majority of courts have rejected other proffered defenses, such as equitable defenses, defenses based on conduct, and defenses based on propriety of response costs or failure to mitigate damages.²⁵ Courts have stricken equitable defenses...