A group of Montana homeowners secured a hollow victory in the U.S. Supreme Court that appears to open the door wider than it has ever been to state court challenges of EPA remedial actions.

In its 7-2 decision in Atlantic Richfield Co. v Christian et al., handed down on April 20, 2020, the Court held that the homeowners can pursue their state common law claims for restoration damages against Atlantic Richfield Co., which is the owner of the Anaconda copper smelter in Butte, Montana. But, as explained below, this favorable outcome, with Chief Justice Roberts writing for the majority, is tempered by the Court’s conclusion that the U.S. Environmental Protection Agency (EPA) must approve any restoration sought by the homeowners.

The central issue in this case is whether the homeowners can seek restoration damages, which under Montana law can be used to “restore” and rehabilitate the impacted property. The homeowners own property that became contaminated by releases of arsenic and lead from smelter operations that ultimately spread over a 300-square-mile area. Since the smelters were shut down in 1980, the property has been the subject of extensive EPA oversight under approved cleanup plans. But the homeowners want to excavate soils to achieve a much lower maximum concentration level for arsenic and install a groundwater treatment system consisting of a permeable barrier, at an estimated cost of $50-58 million in addition to the $450 million that Atlantic Richfield has already spent on remedial action, which is expected to be complete in 2025. They filed suit in 2008 to require Atlantic Richfield to pay for this additional cleanup work, as well as other damages for loss of use and loss of enjoyment.

Homeowners Deemed 'Potentially Responsible Parties'

On its face, the Court’s decision is a win for the homeowners, but it comes with a significant hurdle. The Court held that, because the homeowners are “potentially responsible parties” (PRPs) under the Comprehensive Environmental Response and Liability Act (CERCLA), Section 107(a), EPA must approve any extra cleanup that the homeowners want implemented on their property. The Court based its holding on a “straightforward reading” of Section 107(a), which provides that PRPs include any persons who own a facility where contamination has come to be located. The Court also found that the homeowners are not protected by “innocent landowner,” “third party,” or “contiguous property owner” provisions because public knowledge of the contamination was overwhelming, including the existence of smoke and tailings easements burdening a number of the homeowners’ properties. Due to their status as PRPs, they are subject to the requirements of CERCLA Section 122(e)(6), which prohibit a potentially responsible party from undertaking any remedial action at a facility listed on the National Priorities List (NPL) unless the remedial action has been approved by EPA.

The Montana Supreme Court had reached the opposite conclusion and held that the homeowners were not PRPs and therefore could independently pursue claims for restoration damages under state law. This approach was flawed, Chief Justice Roberts wrote in the Court’s majority opinion, because it would leave property owners “free to dig up arsenic-infected soil and build trenches to redirect lead-contaminated groundwater,” effectively facilitating “tens of thousands of competing individual” cleanups, instead of a single EPA-led one.

As Justice Alito pointed out in a separate opinion concurring in part and dissenting in part, this outcome leaves the homeowners without much of a remedy. The homeowners are effectively pursuing a challenge to an EPA-approved cleanup plan, and want to achieve a more stringent cleanup goals, notwithstanding EPA’s determination that the plan it approved would be protective of human health and the environment. EPA has already gone on record with its view that the homeowners’ preferred remedy is unnecessary and poses excess environmental risks. Thus it is likely to reject the homeowners’ proposed remedial action, which effectively deprives the state court of authority to grant their requested relief. With EPA firmly in charge as the ultimate authority on what is environmentally appropriate, Atlantic Richfield will be able to proceed with future cleanup work without the risk that a Montana state court will impose additional cleanup requirements. That success for Atlantic Richfield must be tempered against the fact that the plaintiffs’ other common law claims for nuisance and trespass can proceed. Such claims are unaffected by the Supreme Court’s decision and can proceed under CERCLA’s savings provisions, CERCLA Section 302(d).

Justice Gorsuch and Justice Thomas dissented, arguing that the plaintiffs should not be considered PRPs because they had not caused any of the contamination that came to be located on their properties, EPA had not given them notice they were considered PRPs, and CERCLA’s statute of limitations barred any claims against them. Justice Roberts’ opinion rejected those arguments as contrary to the CERCLA Section 107 definition of “covered persons” and pointed out that the dissent’s approach would jeopardize EPA’s efforts to ensure orderly cleanup of toxic wastes.

Here Come the State Claims Challenging EPA Cleanup Decisions?

Any U.S. Supreme Court case involving interpretation of CERCLA attracts considerable attention, given the statute’s complicated and unclear directives and limited jurisprudence from the highest court in the land. But it appears that the Atlantic Richfield Co. decision will be particularly impactful. Close attention will be focused on parts of the decision that seem to upend several well-established concepts of environmental law, particularly the lack of pre-enforcement review of EPA-approved remedies.

The most significant apparent departure is the invitation for litigants to bring state claims in state courts that challenge an EPA-selected remedial action. However, it’s not clear what type of claim may be successful. The CERCLA Section 113(h) bar on federal court jurisdiction to entertain challenges to EPA-approved remedial decisions has long been viewed as one of the key tools that promotes speedy commencement of EPA-approved cleanups. “The statutory purpose of Section 113(h) … [is] to ensure that, once the EPA chooses a removal or remedial action for a particular site, litigation will not delay the completion of enforcement of a cleanup action. Village of DePue v. Exxon Mobil Corp., (7th Cir. 2008). By cutting off legal battles over EPA’s decision making, Congress effectively insulated remedial actions from litigation-related delays, with only a few limited exceptions.

Here, however, the Court rejected the argument advanced by Atlantic Richfield Co. and the federal government that state courts were likewise barred from hearing claims that directly challenged EPA’s remedial actions. The Court expressly held, “The Act permits federal courts and state courts alike to entertain state law claims, including challenges to cleanups.” (Slip op. at 11). Federal courts can hear such claims when sitting in diversity and state courts of course have jurisdiction to hear claims arising under state law. This pronouncement could pose a serious threat to a concept expressed earlier in the decision that, “once a plan is selected, the time for debate ends and the time for action begins.” (Slip op. at 3). While in this case, EPA control of the remedial action may preclude much delay, one could speculate that in a different case, a direct challenge to an EPA-approved remedial action could be asserted under state law remedies, such as citizen suits, endangered species protection statutes and tort claims that would not be subject to the EPA-approval requirement. In such a situation some of the issues that would need to be decided are:

• Would the state court have the authority to enjoin a PRP from proceeding with the EPA-selected remedy, and instead require a different one?
• CERCLA Consent Decrees require PRPs to refrain from actions that could adversely affect the implementation, integrity or protectiveness of a remedial action. Can a state court order a PRP to do something that would constitute a violation of a Consent Decree?
• Will EPA need to intervene in such cases to protect the integrity of its remedial actions?
• Should state courts have the authority to question the validity of EPA’s exercise of its discretion?
• If a PRP knows that a proposed cleanup has been, or is likely to be, challenged, will it decline to enter into a settlement with EPA to perform the cleanup?
• Could the prospect of prolonged litigation frustrate EPA’s long-established policy of encouraging PRP-funded cleanups through negotiated settlements with PRPs?

Another potential scenario that could upend a CERCLA remedial action could emerge if an impacted property owner were to succeed in persuading EPA to re-examine and potentially approve additional remedial measures after an initial remedial decision is made. For example, if there is a change in administration or EPA policy, and as a result, the homeowners actually obtain EPA approval for their enhanced cleanup plan, does Atlantic Richfield have any recourse to avoid re-opening its past settlements with EPA? Increased uncertainty surrounding the finality of CERCLA settlements tends to cause the regulated community to question whether it is worthwhile to enter such settlements in the first place. This may impact EPA’s ability to conclude these settlements, which typically are the preferred means of implementing CERCLA remedial actions.

The CERCLA process already incorporates state prerogatives regarding environmental standards through use of ARARs (Applicable and Relevant and Appropriate Requirements), which allow EPA to require cleanups attain more stringent standards than CERCLA provides. What has not been foreseen, however, is the extent to which state courts will now be able to supersede EPA’s authority. Many will be watching to see this potential showdown between state courts and EPA unfold.

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