Department of Defense affirmative cost recovery against private third parties.

• Author: Collier, Renee M.

1. INTRODUCTION: CERCLA--CLEAN UP YOUR OWN MESS II. THE PROCESS: ELEMENTS OF A COST RECOVERY ACTION FOR DOD AGENCIES III. ANALYZING THE CASE: STATE VERSUS FEDERAL RECOVERY STATUTES IV. DISTINGUISHING RECOVERY RIGHTS BETWEEN PRIVATE AND FEDERAL PRPS V. STATUTE OF LIMITATIONS ISSUES VI. RECOVERABLE COSTS VII. RECOVERING FROM A CONTRACTOR VIII. CONCLUSION Share everything. Play fair. Don't hit people. Put things back where you found them. (1) Clean up your own mess. I. INTRODUCTION: CERCLA--CLEAN UP YOUR OWN MESS

   The Reverend Robert Fulghum penned the above oft-quoted words as partial substantiation of his claim that he learned everything he really needed to know about life in kindergarten. Rev. Fulghum could very easily have been discussing the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). (2) His statements and the underlying principles they espouse--responsibility, equity, and accountability--capture much of the spirit Congress intended when it enacted CERCLA's liability scheme back in 1980, as well as the Superfund Amendments and Reauthorization Act (SARA) in 1986. (3)

   This liability scheme, of course, is of vital importance to the Department of Defense (DoD), which is involved in the cleanup of hundreds of past or presently-owned military facilities, many of which are on the National Priorities List, (4) representing billions of dollars in expended and projected cleanup costs. Most recently, the DoD has placed emphasis on a new environmental litigation mission--to recover DoD funds expended on cleanup from those parties that contaminated or contributed to the contamination. This article will deal primarily with the issue of recovering funds from third parties when DoD has expended money to clean up environmental contamination, but will not address the issue of Natural Resource Damages or using an order under section 106 of CERCLA to require a third party to perform cleanup work on DoD property.

   In the Fiscal Year 1998 Defense Authorization Act, (5) Congress encouraged the DoD to recover environmental cleanup costs by requiring that the DoD determine what potential affirmative cost recovery sites were located on DoD property and the likelihood of obtaining cost recovery on those sites. In September 2001, new Defense Environmental Restoration Program (DERP) Guidance provided that The DoD shall pursue recovery of response costs of $50,000 or more, whenever a cleanup response action is required on DoD property due to an imminent and substantial threat to human health or the environment, and the cooperation of the potentially responsible party could not be negotiated in advance of the cleanup work. (6)

   Congress clearly indicated that it expects the DoD to be a good steward of taxpayer resources. It authorized each DoD component performing an environmental cleanup to credit any affirmative cost recovery monies back to their respective DoD component's Environmental Restoration Account (7) account. (8) Typically, federal fiscal guidelines provide that money recovered by a U.S. government agency go directly to the U.S. Treasury general receipts account, which does not directly benefit the recovering agency.

   Though most of CERCLA deals with how environmental cleanups will be conducted, its cost allocation provisions are of critical importance to a potential litigant. Grossly oversimplified, one of CERCLA's objectives is to provide a mechanism or legal framework under which responsible parties who shared in creating an environmental "mess" can arrive at a fair and equitable way to share responsibility for cleaning it up. "CERCLA, as amended by [SARA], provides two legal avenues by which a private party can recoup some or all of the costs associated with an environmental cleanup: a cost recovery action under § 107(a) and a contribution action under § 113(f)(1)." (9) Each avenue may be used under a specific set of circumstances.

   The first legal avenue, section 107 of CERCLA, (10) permits private parties, including the United States, to recover the costs of cleaning up hazardous waste from those contaminators deemed liable for it. CERCLA case law uses the term "potentially responsible party" (PRP) to refer to those from whom costs may be recovered. They fall within one of the four categories referred to in section 107(a). (11) The four categories are: (1) current owners and operators of facilities where hazardous substances are released; (2) owners and operators of facilities at the time the hazardous substances were disposed; (3) persons who arranged for disposal or treatment of such substances; and (4) persons who accepted such substances for transport, treatment or disposal. (12) PRPs are held strictly liable for cleanup costs, subject only to CERCLA's limited defenses. (13)

   Generally, one PRP, as defined by CERCLA statute and case law, cannot hold another PRP jointly and severally liable under section 107 because it is presumed that each PRP is liable for some portion of the contamination; thus, where there are multiple PRPs, no one PRP could possibly be liable for 100% of the damage. (14) Every circuit court has concluded that a PRP, without an affirmative defense that negates its own liability, must seek contribution under section 113 of CERCLA. (15)

   The second legal avenue, section 113(f)(1), (16) provides that any person may seek contribution from any other person who is liable or potentially liable under the general CERCLA liability clause contained in section 107(a), during or following any civil action under section 106 or section 107(a). "In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate. Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action" under section 106 or section 107. (17)

   A third legal basis for recovery of response costs available to private parties, as well as federal agencies like the DoD, is an action in federal district court under state environmental recovery statutes. This option may be the only one available when the contamination is specifically excluded by CERCLA. For example, petroleum contamination is excluded from CERCLA liability, (18) but many state environmental cleanup laws authorize action by private parties against other parties that either contributed to or were the sole cause of the petroleum contamination. (19)

   The DoD components, in coordination with the Department of Justice, must decide the best statutory basis upon which to recover from PRPs. This typically requires an analysis of the applicable federal and state statutes, the facts involved, the response actions taken, the defendant's financial state, and the proof of costs and liability required under each statute. Oftentimes, corporate successions, name changes, reverse mergers, and stock sales make it very difficult to determine a corporation's liability status.

2. THE PROCESS: ELEMENTS OF A COST RECOVERY ACTION FOR DOD AGENCIES

   Section 107 provides generally that past and present owners and operators of a site, and generators and transporters, who contributed hazardous substances to a site, shall be liable. In order to establish liability under section 107(a), the plaintiffs must establish the following: 1) the contaminated site is a "facility"; (2) there has been a "release" or "threatened release" of a "hazardous substance" from the facility; (3) the government has incurred "costs" in response to the release or threat of release; and (4) each defendant must be one of the following "persons": (a) one who owns or operates the facility; (b) one who owned or operated the facility at which such hazardous substances were disposed of; (c) one who arranged for disposal of a hazardous substance which it owned or possessed, at a facility containing such hazardous substances; or (d) one who accepted a hazardous substance for transport to a disposal or treatment facility or to a site. (20)

   Due to the possibility of cost recovery efforts in any case in which CERCLA funds are expended, the observation, documentation and preservation of critical facts and response costs is important to assure that:

   * potential evidence concerning the site ... and responsible parties is noted and documented before response activity or the passage of time obscures or eliminates it;

   * physical evidence essential at trial is collected and preserved appropriately; and

   * sufficient evidence of total costs and claims paid from the Fund has been maintained and is available to support recovery by the government. (21)

   Typically, a cost recovery action begins with the government entity concerned cleaning up the contamination. Under section 104 of CERCLA, the United States or its authorized representatives may take a "removal" or "remedial action" (22) at a site when, inter alia, any hazardous substance is released or there is a substantial threat of such a release into the environment. (23) While the cleanup is being conducted, or after it is complete, it is DoD policy that the individual service components shall pursue cost recovery for amounts when the total expended cleanup exceeds $50,000. (24)

   The DoD agencies may pursue an action under section 107(a) for removal or remediation costs incurred by the United States not inconsistent with the CERCLA National Contingency Plan (NCP). (25) Most often, costs are paid by the DoD agency out of its environmental restoration account. (26) Section 104(b) also authorizes the recovery of costs of sampling, analysis, monitoring and surveying programs, and certain other costs, including those for planning, legal, and engineering services. (27)

   A successful affirmative cost recovery action requires the DoD agency be prepared to introduce evidence demonstrating: (1) release of a hazardous substance or the substantial threat of such a release; 2) the responsibility of the defendant(s)...