The constitutional rights of nonsettling potentially liable responsible parties in the allocation of CERCLA liability.

• Jurisdiction: United States
• Author: Man, Christopher D.
• Date: 22 June 1997

1. INTRODUCTION

   The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund)(1) is widely criticized as unfair because it imposes retroactive, strict, and joint and several liability upon a broad class of persons whom Congress has deemed "responsible" for hazardous waste contamination.(2) Because of the low threshold for liability(3) and the massive costs of cleanup,(4) CERCLA cases tend to become complex as parties implead as many defendants as possible.(5) Often, "[t]he key issue becomes how to allocate the clean-up costs among defendants."(6)

   Congress and the Environmental Protection Agency (EPA) have sought to minimize litigation over allocation issues by encouraging settlements.(7) Among EPA's most powerful tools to promote settlements is the authority to provide settling Potentially Responsible Parties (PRPs) contribution protection.(8) A PRP who enters into a consent decree resolving its liability with EPA is immunized against contribution actions by nonsettling PRPs and the nonsettling PRPs' liability is reduced by the amount of the settlement.(9)

   Under CERCLA's liability scheme, parties who may have legally disposed of relatively insignificant amounts of waste(10) can find themselves having to pay the bulk of the cleanup costs at a site, costs that average between $25 million and $30 million.(11) A PRP contemplating settlement recognizes that if other PRPs settle with the government, its own liability is "reduced by the amount of the settlement,"(12) not by the proportion of fault that would be attributed to the settling PRPs.(13) Consequently, nonsettling PRPs bear the risk that EPA may settle such claims for less than they are worth.(14) EPA fully appreciates the inequity that settlements may impose on nonsettling parties and uses this hardship to coerce parties into settling.(15)

   This Article examines the settlement process under CERCLA and concludes that EPA's use of the contribution bar in CERCLA cases to shift part of the equitable share of settling PRPs' liability to nonsettling PRPs violates the Due Process Clause of the Fifth Amendment.(16) It will be argued that PRPs have a protected property right in the money they pay as legal damages and due process should ensure that any method used for allocating liability is equitable. The U.S. Supreme Court has repeatedly recognized that due process precludes the use of a consent decree to impose a legal burden on third parties who are not before the court.(17) Therefore, EPA and settling parties cannot use CERCLA's settlement provisions to negotiate and resolve the liability of nonsettling PRPs through a consent decree in a manner that is inconsistent with the Due Process Clause.

   Part II provides an overview of CERCLA's liability scheme and contribution provisions. Part III argues that CERCLA's settlement scheme denies nonsettling parties due process. Part IV concludes by suggesting that rather than promote settlements through coercion, CERCLA should foster settlements by providing PRPs the necessary information to resolve the liability among themselves.

   H. Overview of CERCLA's Liability Scheme and Contribution Provisions

   CERCLA "has been uniformly interpreted as imposing retroactive, strict, joint and several liability on responsible parties."(18) CERCLA imposes liability, with rights of contribution, on the following types of entities associated with a hazardous disposal facility: current owners or operators of the facility, past owners and operators, those who arranged for disposal of hazardous waste (usually referred to as 'generators' of hazardous materials), and transporters of such materials."(19)

   As originally enacted, Congress did not provide Potentially Responsible Parties (PRPs) an explicit contribution cause of action in CERCLA, but one was implied from the structure of the statute.(20) Courts implied contribution rights because a literal reading of CERCLA's joint and several liability provision "left a PRP faced with the prospect of being singled out as the defendant in a cost recovery action without any apparent means of fairly apportioning CERCLA costs awarded against it to other PRPs."(21)

   In 1986, Congress amended CERCLA and provided PRPs an explicit right to contribution.(22) However, Congress also added a provision to insulate favored, settling parties from contribution claims through an amendment that provides:

   A person who has resolved its liability to the United States or a State in an

   administrative or judicially approved settlement shall not be liable for claims

   for contribution regarding matters addressed in the settlement. Such settlement

   does not discharge any of the other potentially liable persons unless its

   terms so provide, but it reduces the potential liability of the others by the

   amount of the settlement.(23)

   The legislative history further explains that Congress expected a court evaluating a proposed consent decree to "satisfy itself that the settlement is reasonable, fair, and consistent with the purposes that CERCLA is intended to serve."(24)

   The First Circuit aptly described CERCLA's settlement provision by explaining that

   Congress explicitly created a statutory framework that left nonsettlors at risk

   of bearing a disproportionate amount of liability. The statute immunizes

   settling parties from liability for contribution and provides that only the amount

   of the settlement -- not the pro rata share attributable to the settling party

   -- shall be subtracted from the liability of the nonsettlor. This can prove to be a

   substantial benefit to settling PRPs -- and a corresponding detriment to their

   more recalcitrant counterparts.(25)

   One district court has described CERCLA's settlement procedures as a "carrot and stick" approach, where the "carrot" is the promise that settling parties' liability will be limited and the "stick" is that if the settlement is too low, nonsettling parties pay the difference.(26)

   Still other courts note that the risk of placing a disproportionate share of CERCLA's liability on nonsettling parties has been well accepted. These courts point to the fact that Congress allows d& risk to exist, even though it may seem unfair.(27) Indeed, some courts have concluded that the threat of "disproportionate liability" is 'an integral part of the statutory plan" and "a technique which promotes early settlements and deters litigation for litigation's sake."(28)

3. CERCLA's Settlement Scheme Denies Nonsettling Parties Due Process

   A. Due Process Precludes Nonparties from Being Bound by a

   Judgment Among Other Parties

   The Due Process Clause requires the judiciary to employ fair procedures when resolving disputes between civil litigants.(29) As the Supreme Court explained, "[t]his conclusion is hardly a novel one. The Court traditionally has held that the Due Process Clause protects civil litigants who seek recourse in the courts, either as defendants hoping to protect their property or as plaintiffs attempting to redress grievances."(30)

   Accordingly, a fundamental tenet of the Due Process Clause is that only parties and their privies can be bound by a judgment.(31) This tenet stems from the firmly established principle that every party deserves to have their case fully and fairly litigated.(32) As part of due process, parties that have never appeared in a prior action should have a chance to present their evidence and arguments on the claim.(33) For this reason, the Supreme Court has repeatedly recognized that [i]t is a violation of due process for a judgment to be binding on a litigant who was not a party or a privy and therefore has never had an opportunity to be heard."(34)

   Although the Court has encouraged the development of procedures to simplify complex litigation,(35) it has remained cognizant of the fact that there is "a failure of due process ... where it cannot be said that the procedure adopted fairly insures the protection of the interests of absent parties who are bound by it."(36) Consequently, the Court has, for example, preserved due process by limiting the ability of parties to bind nonparties through class actions when "the selection of representatives for purposes of litigation whose substantial interests are not necessarily or even possibly the same as those whom they are deemed to represent, does not afford the protection to absent parties which due process requires."(37)

   Likewise, the Supreme Court has precluded parties from imposing obligations on nonparties through the use of consent decrees. Among the Supreme Court's most relevant decisions in this context is Local No. 93, Int'l Assn of Firefighters v. City of Cleveland.(38) In due case, groups of black and hispanic firefighters brought a class action against the City of Cleveland under Title VII seeking an affirmative action decree to redress previous discrimination by the City.(39) The City and the plaintiffs proposed a consent decree that would establish an affirmative action program, and Local 93 intervened complaining that affirmative action would harm its members.(40) After extensive hearings on the decree, the District Court ordered the consenting parties to negotiate a new consent decree with Local 93.(41) The parties were unable to agree, however, and the District Court entered a consent decree between the plaintiffs and the City requiring affirmative action.42 Local 93 appealed.(43)

   The Supreme Court upheld the consent decree, but emphasized that Local 93 would not be bound by the agreement.(44) The Court explained that the rights and responsibilities accorded by a consent decree apply only to those who give their consent.(45) As the Court explained, "[i]t has never been supposed that one party -- whether an original party, a party that was joined later, or an intervenor -- could preclude other parties from setting their own disputes and thereby withdrawing from litigation."(46) Therefore, Local 93 "does not have the authority to block the decree merely by withholding its...