RESOLVING "RESOLVED": COVENANTS NOT TO SUE AND THE AVAILABILITY OF CERCLA CONTRIBUTION ACTIONS.

Date01 October 2020
AuthorPodell, Jacob

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)--as part of its dual goals of cleaning up hazardous-waste sites and ensuring that the polluter pays for that cleanup--gives private parties two mutually exclusive causes of action: cost recovery and contribution. Contribution is available in limited circumstances, including if the party has "resolved" its liability with the government. But CERCLA does not define this operative term. Federal courts are split over how the structure of a settlement resolves liability. Several courts follow Bernstein v. Bankert, which held that any conditions precedent and nonadmissions of liability strongly suggest that a party has not yet resolved its liability. The Ninth Circuit's recent case, ASARCO LLC v. Atlantic Richfield Co., said liability is resolved if the settlement determines the party's obligations with "certainty and finality.'' Bernstein deviates from CERCLA's text and policy, leading to serious inconsistencies in the interpretation and application of the statute. ASARCO injects uncertainty into the statute, which disincentivizes settlements. When the stakes are the reallocation of billions of dollars and the amelioration of the most notorious environmental disasters, getting it right is paramount. This Note proposes a bright-line rule--liability is resolved when the settlement contains any covenant not to sue, conditional or unconditional--and argues that this reading cleans up many of the issues the current circuit split imparts on the statute.

INTRODUCTION I. AN OVERVIEW OF CERCLA LIABILITY A. The Parties Under CERCLA and Their Liabilities B. The CERCLA Causes of Action II. AN UNRESOLVED CIRCUIT SPLIT A. Conditions Precedent and Nonadmissions of Liability: The Sixth and Seventh Circuits' Approach B. "Certainty and Finality": The Ninth Circuit's Approach III. THE BRIGHT-LINE RULE "RESOLVES" THE CIRCUIT SPLIT CONCLUSION INTRODUCTION

Four years after Congress thought it had closed environmental law's "last remaining loophole," a chemical soup full of carcinogens began bubbling up in people's basements in the Love Canal neighborhood of Niagara Falls, New York. (1) In 1953, the local school board had bought what it knew to be essentially a loosely covered dump of industrial waste from the Hooker Chemical Company for one dollar. (2) After years of complaints of health problems, the problem reached crisis levels when heavy rains caused the toxins to seep into people's homes. (3) In August 1978, the State of New York declared a public health emergency, with the federal government stepping in five days later. (4) Over the next two years, around 1,000 people left their homes, and most would never return. (5) Love Canal was by no means unique. For example, in the ominously named "Valley of the Drums," a massive collection of metal drums left in a field caught fire and burned for more than a week. (6) Or take Times Beach, where road crews used the notorious carcinogen dioxin as a dust suppressant. (7)

Despite the 1970s being the "environmental decade" when Congress legislated the bulk of the modern-day environmental regulatory regime, it left one gap. (8) It failed to address the pollution that predated these statutes. (9) Love Canal, Valley of the Drums, Times Beach, and a slew of other incidents generated the political pressure necessary to pass federal legislation closing this gap. (10) However, the election of Ronald Reagan and the Republican takeover of the Senate in 1980 left the Ninety-Sixth Congress mere weeks to pass any legislation on the topic. (11) Thus, the legislative history is, at best, messy. (12) This rushed process resulted in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (13)--a statute frequently and colorfully ridiculed for its complexity and poor drafting. (14)

With a set of amendments in 1986 known as the Superfund Amendments and Reauthorization Act (SARA), (15) CERCLA created a complicated structure designed to effect two goals: (1) make sure hazardous-waste sites are cleaned up in a timely manner and (2) make those who caused the contamination pay for the cleanup. (16) It addresses the first goal by authorizing the federal government to clean up a site and then sue those responsible (17) or compel those parties to clean up the site themselves. (18) In addition, it created a tax on the chemical industry that would create a large fund to finance cleanups. (19) "Superfund," as this fund is commonly called, has become the nickname for the whole statute. (20) The statute addresses the second goal by allowing parties who pay for cleanup efforts beyond the harm they caused to sue other polluters, which CERCLA calls "Potentially Responsible Parties" (PRPs). (21) Parties that incur cleanup costs directly can bring "cost-recovery" actions, while parties whose costs were imposed by a legal action can bring a "contribution" claim. (22)

One circumstance in which a party may bring a contribution suit is when that party has already "resolved" its liability with the United States or a state. (23) And now CERCLA's poor drafting rears its head: What does "resolved" mean? For example, if the government agreed to not sue only on the condition that the party completely finishes a cleanup (termed a "condition precedent"), (24) is liability resolved if the cleanup is not yet finished? Essentially, the debate concerns how the structure of a settlement determines resolution of liability. Given the frequency of settlements (25) and the gargantuan costs of cleanups, (26) resolving questions of liability in hazardous-waste cases is of critical importance.

This Note proposes a bright-line rule to determine if a settlement resolves liability. Liability is "resolved"--and thus a contribution action is available--if a settlement contains any covenant not to sue, conditional or otherwise; a party's failure to admit or deny liability is irrelevant to this analysis. Part I provides an overview of CERCLA's structure--namely who is liable for what and how the causes of action to assign this liability interact. Part II analyzes the circuit split created by this gap, concluding that both of the leading approaches produce unsatisfactory results. Part III proposes the bright-line rule described above and shows how that solution is consistent with CERCLA's text, overall statutory structure, and policy objectives.

  1. AN OVERVIEW OF CERCLA LIABILITY

    CERCLA liability is complex and broad. The statute uses intricate pathways to make a wide range of parties liable for an even wider range of damages. (27) This Part provides an overview of how CERCLA's liability provision works. Section LA outlines the statute's basic liability structure and how the government leverages that liability to effect cleanups, while Section LB describes how CERCLA's two causes of action function and interact with each other.

    1. The Parties Under CERCLA and Their Liabilities

      Under CERCLA, there are multiple categories of parties that can be liable (the PRPs), several types of recoverable damages, and a plethora of ways the government uses this liability to clean up hazardous pollution. This Section will walk through each one in turn.

      First, who is liable under CERCLA? For a party to be liable, it must meet the definition of "person" under the statute, which is easy given its broad definition. (28) There are four types of "persons" who can be held liable as PRPs under the statute. First, there are the current owners or operators of a hazardous-waste site. (29) The term "owner or operator" is, unhelpfully, defined as "any person owning [or] operating" a facility or vessel. (30) Members of this group are liable regardless of whether they actually caused the pollution. For instance, the current owner of a landfill that spews toxic materials would be designated as a PRP under the statute, even if it recently purchased the site and played no role in creating the hazardous conditions. (31) The second category is past owners or operators. To be liable, the past owner or operator must have owned or operated the site at the time the hazardous chemicals were disposed of. (32) Members of the third group of PRPs, known as "arrangers," (33) are liable if they paid or coordinated with someone else to dispose of the waste. (34) "Arranging" requires an intent to enter the transaction for the purpose of disposing of the hazardous substance. (35) The fourth and final category is transporters of hazardous wastes, but only if they had a role in selecting the site of disposal. (36)

      And what are they liable for? There are three categories of recoverable costs from liable parties under CERCLA. First, PRPs are liable for the costs of the cleanup. That liability is owed to any party that incurred costs as part of the cleanup, including but not limited to the federal government, states, and Native American tribes. (37) CERCLA uses the term of art "response" to describe these cleanups, (38) which are divided into two types: removal actions and remedial actions. (39) Both actions need to address a "release" of a "hazardous substance," or the threat of one, into the "environment." (40) As to the difference between the two, removal actions are "'those taken to counter imminent and substantial threats to public health and welfare,' while remedial actions 'are longer term, more permanent responses.' " (41) Second, PRPs must cover the cost of health assessments for, or public health studies of, the people who might later suffer adverse health consequences from the toxic substances. (42) Third, PRPs are liable for natural resource damages. (43) This provision goes beyond response costs to cover damages to the environment that remain once pollution is removed. (44) However, the scope of environmental damage can be quite difficult to quantify. (45) Notably, CERCLA does not cover damages related to personal injury or property value, nor does it allow successful plaintiffs to...

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