Portfolio Media, Inc. 648 Broadway, Suite 200 New York, NY 10012 www.law360.com Phone: +1 212 537 6331 Fax: +1 212 537 6371 customerservice@portfoliomedia.com CERCLA s Equitable Allocation Of Liability Law360, New York (March 30, 2009) -- Imagine this scenario. U.S. Environmental Protection Agency identifies a polluted, historically industrial-use waterway in Tacoma, Wash., and designates it as a part of a larger federal Superfund site. Over a decade later, the United States sues a host of potentially responsible parties that had former or current operations along the waterway, including the Port of Tacoma. These responsible parties quickly agree to settle with the government by a consent decree to incur costs of performing a cleanup of the site. As often happens, some potentially responsible parties are not included in the government s initial Comprehensive Environmental Response, Compensation and Liability Act[1] claim, so they don t participate in the settlement. And, as is the nature of CERCLA litigation, one of the participating parties later identifies and sues the overlooked parties for contribution to recover an equitable share of the cleanup costs. This is pretty typical, but what happens next is anything but typical. First, Todd Shipyards[2], a shipbuilder named in the port s contribution lawsuit for its World War I and II era defense operations seeks CERCLA contribution from the United States. The federal district court first denies the government s motion to dismiss, then determines it committed manifest error and reverses itself, dismissing Todd s claim. Todd is left at risk and out of luck for a remedy under CERCLA; the port also may be leaving some money on the table if it cannot go after the government itself; and the government might be able to avoid its CERCLA liability for the work at the shipyards site. Posted with permission from Law 360. Posted http://www.law360.com with permission from Law 360. www.law360.com
Liability and Allocation of Cleanup Costs Under CERCLA CERCLA provides the most widely used statutory vehicle for ensuring the cleanup of sites contaminated with hazardous substances and the allocation of liability for the costs of those cleanups. Its scope encompasses the universe of hazardous substance contaminated sites, from large listed Superfund sites (like the one at issue in Todd Shipyards) to single properties contaminated by relatively minor releases. CERCLA provides two main types of claims by which parties can recover and allocate cleanup costs: cost recovery under CERCLA 107(a) and contribution under CERCLA 113(f). The appropriate application of CERCLA s liability and allocation scheme has been litigated throughout the country for decades, but relatively recently two Supreme Court Cases resolved major issues. In 2004, in Cooper v. Aviall, the Supreme Court held that a party who has not been sued under CERCLA 106 or 107(a) cannot bring a claim for contribution under CERCLA 113(f).[3] Immediately, this ruling caused concern for parties that performed a cleanup voluntarily because previous decisions in many courts had excluded responsible parties from making claims under CERCLA s other available remedy cost recovery in 107(a). A few years later, though, the Supreme Court clarified in U.S. v. Atlantic Research[4] that a potentially responsible party could recover its response costs from other potentially responsible parties using a 107(a) cost recovery claim. Contribution Issues in the Todd Shipyards Case Todd cited two main issues underlying its third party complaint for contribution from the government. First, Todd argued that the United States itself was a responsible party for its connections to the operations of two of Todd s predecessor companies at the Todd Shipyards location during World War I and World War II. Todd argued that the government contracted with these companies to build ships for the national defense and during these time periods, the government acted as an owner, operator or arranger at the site, making it a responsible party under CERCLA.[5] Second, Todd argued that because the government allegedly indemnified Todd s predecessor companies in its contracts, the government acquired at least part of Todd s liability.
The United States sought dismissal on the basis that Todd could not assert a contribution claim under CERCLA since it had not been subject to an action under CERCLA 106 or 107(a). In reply, Todd pointed to the 2005 CERCLA 107(a) cause of action brought by the United States against the port and other potentially responsible parties to spur the cleanup and recovery of cleanup costs. The court initially agreed with Todd, citing a passage in Atlantic Research that CERCLA 113(f) authorizes a contribution action to responsible parties with common liability stemming from a 106 or 107 claim.[6] The court distinguished Cooper v. Aviall on first on the basis that Todd s contribution claim clearly was tied to the underlying 107 claim, since the port would not be seeking contribution from Todd if it had not been liable under the initial 107 claim. And second, the court focused on the fact that Todd alleged that the United States itself was a responsible party for contamination at the same property for which the port sought to recover costs from Todd. The government then moved to have the court reconsider the decision. Upon reconsideration, the court reversed itself holding that it had committed manifest error in deciding that a party that had not been sued under CERCLA 106 or 107(a) could pursue a CERCLA contribution action against another responsible party.[7] The court held that the decision in Atlantic Research did not disturb the holding in Cooper v. Aviall, whose bar on claims for contribution absent a prior 106 or 107 action applied to Todd. Since Todd had not been sued under 106 or 107, it could not bring a contribution action against the government. CERCLA s Equitable Goals Are Not Served by the Holding CERCLA s liability scheme primarily focuses on two goals: (1) that contaminated sites get cleaned up, and (2) that responsible parties pay their fair share of the cleanup costs. The district court s final ruling followed a conservative reading of the language of the statute and recent Supreme Court precedent. Under the circumstances of the case, it is tempting to argue that the court could have interpreted the statute and applied the facts to ensure that Todd did not end up paying more than its fair share. Its initial decision along these lines would have done so and would have served the equitable component of CERCLA s liability allocation scheme.
The basis for Todd s concern was persuasive if it had no contribution claim against the United States, there was a very real likelihood that Todd could end up paying more in the CERCLA case than its fair share of the cleanup costs. Although recognizing Todd s concern, the court again looked straight to the statute, which limits a contribution defendant s liability to its equitable share of the cleanup costs. Under this scheme, a contribution defendant theoretically has no need for a claim of its own because its liability is fixed and limited by its degree of responsibility for the contamination and cleanup costs. Clearly, though, a potential exists that a party may be attributed more than its share of cleanup costs when its there are other responsible parties that (1) are not in the case at all, and (2) allegedly contributed to the same contamination. Conclusion It is not unusual that the government could find itself acting as both the enforcer of a CERCLA action and also a potentially responsible party. The ruling in Todd Shipyards could have a significant impact on parties who find themselves involved in a CERCLA action but who s liability resulted, at least in part, from their work for the government. The ruling would potentially allow the initial contribution plaintiff s selection of targeted responsible parties to determine or limit the scope of parties in the lawsuit. Under CERCLA s contribution scheme this seemingly would encourage the plaintiff to cast a wide net to ensure it fully recovered its cleanup costs. But when a plaintiff does not bring all potentially responsible parties to the table, those that are at the table could not look to third parties for contribution. Here, Todd claimed indemnification under contracts between the government and Todd s predecessor companies. For jurisdictional reasons the court would not take up the government contract indemnification issue outside of the CERCLA claims, so Todd was left with no remedy but to try to limit the scope of its liability. Arguably Todd could still introduce evidence of the government s role in the contamination of the shipyards and limit its share of liability accordingly. And, to the extent some of the government-based liability was attributed to Todd, it would require a separate action to pursue its contractual indemnification. --By Jonathan Bull and Tracy Penn, Gardere Wynne Sewell LLP
Jonathan Bull is an associate with Gardere Wynne Sewell in the firm's Dallas office. Tracy Penn is an associate with the firm in the Houston office. The opinions expressed are those of the authors and do not necessarily reflect the views of Portfolio Media, publisher of Law360. [1] Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq. [2] Port of Tacoma v. Todd Shipyards Corp., No. C08-5132BHS (W.D. Wash. Jan. 14, 2009) [3] Cooper Industries Inc. v. Aviall Services Inc., 543 U.S. 157, 161(2004). [4] United States v. Atlantic Research Corp., 127 S. Ct. 2331 (2006) [5] Port of Tacoma v. Todd Shipyards Corp., No. C08-5132BHS, 2008 WL 4454136, at *4 (W.D. Wash. Sept. 30, 2008) (subsequently revered by the same court). [6] Id., at *10. [7] Port of Tacoma v. Todd Shipyards Corp., No. C08-5132BHS (W.D. Wash. January 14, 2009)(reversing prior opinion)