Cry, No Recovery!: Narrowing Judicial Interpretation of Cercla's Double Recovery Provision

• Publication year: 2016

Cry, No Recovery!: Narrowing Judicial Interpretation of CERCLA's Double Recovery Provision

Allison Murphy

CRY, NO RECOVERY!: NARROWING JUDICIAL INTERPRETATION OF CERCLA'S DOUBLE RECOVERY PROVISION

Abstract

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was enacted to ensure the cleanup of thousands of hazardous waste sites throughout the United States. The Act also purports to provide parties who must assume the astronomical costs of cleanup with a federal right to contribution or recovery from responsible parties. The language of the Act clearly prohibits plaintiffs from recovering the same costs under both CERCLA and another comparable state or federal law. However, the judiciary has expanded the Act's double recovery provision to prevent plaintiffs from recovering from both responsible parties and collateral sources such as settlements, insurance assets, and other economic benefits. Judicial gloss on Congress's double recovery provision prevents plaintiffs from asserting their right to recovery, thus discouraging parties from voluntarily undertaking cleanup and encouraging protracted litigation.

This Comment argues that CERCLA's double recovery provision should be narrowly interpreted to create economic incentives for parties to shoulder the burdens of hazardous site cleanup. Plaintiffs should be allowed to recover from collateral sources as well as other responsible parties. Because every federal court has prohibited collateral source recovery, this Comment also proposes that courts should not place undue weight on the plaintiff's economic benefit from site remediation in double recovery cases. This factor merely represents a thin guise for further expanding the double recovery prohibition and works to prevent plaintiffs from recovering their full remediation costs. This Comment will demonstrate that a narrow interpretation of CERCLA's double recovery prohibition will ultimately further the Act's goals of expeditious cleanup and environmental protection.

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Introduction

Picture a typical, working-class neighborhood in the United States. Modest row houses stand side by side. Children walk home from a brick school building "with burns on their hands and faces."¹ A girl has a cleft palate and an extra row of teeth in her mouth.² The boy beside her has an eye defect.³ The trees in the small, fenced yards are black and bare.⁴ It rained recently, and noxious puddles fill the streets.⁵ The air is choking; a stench hangs in the breeze.⁶ Huge corroding metal barrels and bits of trash seem to rise from the ground, breaking up the earth in the brown yards.⁷ This place is poisonous.⁸

This place is also real.⁹ Love Canal, a neighborhood in Niagara Falls, New York, was built above 21,000 tons of buried toxic waste.¹⁰ The area became a dumping ground in the 1920s after William T. Love abandoned his attempt to create a model city powered by Niagara Falls, leaving a partially dug canal intended to connect the upper and lower Niagara Rivers.¹¹ "[I]n the 1940s, Hooker Chemical Company began dumping industrial waste" into the canal.¹² In 1953, Hooker Chemical covered the waste site with dirt and sold it to the city of Niagara Falls for one dollar.¹³ Approximately one hundred homes and a school were built on the site in the late 1950s.¹⁴ Two years later, a twenty-five-foot area collapsed, exposing toxic waste drums throughout the canal area and puddles of chemicals in yards, basements, and on the school grounds.¹⁵ Residents, who were ultimately evacuated from the site,¹⁶ reported

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blue goo bubbling up from their basements, strange odors, and exploding rocks.¹⁷

The nearly eighty different toxins that had seeped from the canal¹⁸ caused a plethora of health problems for Love Canal residents; many suffered from urinary tract disorders, nervous breakdowns, epilepsy, and miscarriages.¹⁹ Fifty-six percent of children born between 1974 and 1978 in the Love Canal area suffered from birth defects.²⁰ These health problems brought the area into national headlines in 1978, and Love Canal became the first man-made federal disaster area.²¹

Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or the Act) in 1980 as a response to the Love Canal disaster.²² At the time, the number of abandoned hazardous waste sites in the United States was estimated at approximately 20,000, and CERCLA provided the means for a comprehensive cleanup scheme.²³ The Act was hurriedly passed and has led to complex and protracted litigation.²⁴

One of the most controversial issues in recent CERCLA litigation, however, has been the Act's double recovery provision.²⁵ CERCLA

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theoretically provides strictly liable responsible parties who undertake site cleanup, such as past and present owners and operators as well as hazardous waste transporters, with a federal claim for cost recovery or contribution against other parties who are also responsible for the contamination.²⁶ For example, an owner of a current hazardous site may undertake cleanup voluntarily or by a consent order.²⁷ Such an owner may then sue for contribution under CERCLA to recover some of the costs of cleanup from other responsible parties, including past owners of the site who also contributed to the contamination.²⁸

The Act prohibits plaintiffs from recovering under any other comparable state or federal law, thus preventing them from receiving a windfall double recovery.²⁹ The judiciary, however, has expanded the double recovery provision to prevent plaintiffs seeking contribution from also recovering from collateral sources such as settlements with other responsible parties and insurance payouts.³⁰ For example, if a potentially responsible plaintiff who has undertaken cleanup seeks contribution from another responsible party, and has already recovered some costs from insurance, the defendant's share of liability will be offset by the plaintiffs insurance recovery.³¹ Defendants in these contribution cases have jumped at the chance to assert a double recovery defense to reduce or extinguish their own responsibility to pay for site cleanups.³² Even when the double recovery defense is rejected, courts have allowed defendants to escape liability by examining any economic benefit the plaintiff may have incurred from undertaking cleanup.³³

Judicial expansion of CERCLA's double recovery provision prevents responsible parties from voluntarily assuming the costs of hazardous waste site

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cleanup.³⁴ Federal courts should allow plaintiffs to recover from responsible parties as well as collateral sources like settlements and insurance assets. The judiciary should also place less weight on the economic benefit to the plaintiff in double recovery cases. This approach would ultimately encourage responsible parties to shoulder the initial burden of cleanup because there would be market-based incentives to acquire future profit from both collateral sources and contribution.³⁵ The possibility of some future windfall would stimulate responsible parties to claim ownership of contaminated sites, expedite remediation, and alleviate the burden on the taxpayer.³⁶

This Comment, proceeding in four Parts, will demonstrate the efficacy of a narrow judicial interpretation of CERCLA's double recovery provision. Although this Comment does not suggest that courts should allow profiteering by those responsible for site contamination, there must be some incentive for affected parties to take on the initial costs of cleanup and assume their environmental responsibilities. Collateral source recovery and less judicial consideration of a plaintiff's economic benefit will provide the incentives for responsible parties to remediate the thousands of sites that pose a risk to human health and the environment.³⁷ Because the Environmental Protection Agency (EPA) estimates that one in four Americans lives within three miles of a contaminated site, incentives for cleanup will prove especially pertinent in the coming years.³⁸

First, Part I discusses CERCLA's imperfect framework. Section A explains the Act's principled purpose but fragile passage, which resulted in a compromised draft. Section B details CERCLA's objectives and how parties who have incurred hazardous waste site remediation costs may recover those expenses. Section C illuminates how courts have apportioned liability among responsible parties using a mishmash of equitable factors.

Second, Part II examines the judicial expansion of CERCLA's double recovery provision. Section A discusses the judiciary's refusal to apply the

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traditional tort doctrine, the collateral source rule, to CERCLA cases. Section B analyzes recent cases that have contributed to double recovery expansion. This section details how recovery from insurance assets and increased property value can prevent a plaintiff from recovering full cleanup costs from defendants in a contribution action. This section also discusses how double recovery has not been expanded to encompass rate recovery.

Third, Part III illustrates the most recent double recovery defense of contract pricing offset in Lockheed Martin Corp. v. United States. In this case, the court declined to find a double recovery, but placed undue weight on the economic benefit to the plaintiff, using this factor as a guise to further expand the double recovery prohibition.³⁹ Section A describes how the court used traditional allocation factors to determine liability. Section B examines the court's finding that contract pricing offset does not constitute a double recovery. Section C analyzes the economic benefit to Lockheed and how the court used this factor to reduce the government's share of liability.

Finally, Part IV demonstrates the merits of narrowing the judicial interpretation of CERCLA's double recovery provision. Section A suggests the benefits of allowing plaintiffs to recover from collateral sources as well as other...