Ninth Circuit Weighs In On Circuit Split Regarding CERCLA Contribution Claims After Settlement and The Statute of Limitation

by Sheppard Mullin Richter & Hampton LLP

Asarco, LLC v. Atlantic Richfield Company, 866 F.3d 1108 (9th Cir. 2017). In a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) contribution case, the Ninth Circuit addressed three issues of first impression for the circuit related to the ability to pursue contribution after settlement and the application of the statute of limitation. Specifically, the court looked at (1) whether a settlement agreement entered into under an authority other than CERCLA may give rise to a CERCLA contribution claim; (2) whether a “corrective” measure under the Resource Conservation and Recovery Act (RCRA), qualifies as a “response” action under CERCLA; and (3) what it means for a party to “resolve its liability” in a settlement agreement. Id. at 1113. The Ninth Circuit concluded that a settlement under RCRA may give rise to a CERCLA contribution claim and that corrective measures under a RCRA decree may constitute response costs under CERCLA. Id. at 1113–14. The court found that the CERCLA contribution claim at issue was not barred by the statute of limitation because plaintiff Asarco, LLC (Asarco) did not “resolve its liability” under a 1998 RCRA consent decree, and, therefore, could not have brought its contribution action until a subsequent CERCLA consent decree was issued. Id.

The East Helena Superfund Site (“Site”), located in and around an industrial area in Montana’s Lewis and Clark County, includes Asarco’s former lead smelter and a zinc fuming plant operated by ARCO’s predecessor Anaconda Mining Company (Anaconda). Id. at 1114. The Site has been a locus of industrial production for more than a century, associated with decades of hazardous waste. Id. Specifically, the lead smelter discharged toxic compounds, including lead, arsenic, and other heavy metals, into the air, soil, and water, ultimately resulting in the U.S. Environmental Protection Agency (EPA) placing the Site on CERCLA’s National Priorities List. Id. Asarco alleges that Anaconda’s zinc fuming plant contributed to this contamination. Id. at 1115.

In 1998, the United States brought RCRA and Clean Water Act claims against Asarco for civil penalties and injunctive relief, alleging Asarco illegally disposed of hazardous waste at the Site. Asarco and the United States eventually reached a settlement approved by the federal district court (“RCRA decree”). Id. at 1114. In addition to assessing civil penalties, the RCRA decree required Asarco to take certain remedial actions to address past violations. Id. Asarco failed to meets its cleanup obligations required pursuant to the RCRA decree. Id.

In 2005 Asarco filed for Chapter 11 bankruptcy protection. The United States and Montana filed claims in Asarco’s bankruptcy proceeding, asserting joint and several liability claims under CERCLA. Id. at 1114–15. In 2009, the bankruptcy court entered a consent decree (“CERCLA decree”) between the parties that established a custodial trust for the Site, turning over cleanup responsibility to a trustee. Id. at 1115. Additionally, Asarco paid $99,294,000 to fully resolve and satisfy its obligations under the RCRA decree. Id.

On June 5, 2012, Asarco brought an action against ARCO under CERCLA section 113(f)(3)(B), which allows persons who have taken action to clean up hazardous waste sites to seek monetary contribution from other parties who are also responsible for the contamination. Id. This section provides that a person that has “resolved its liability” for “some or all of a response action or for some or all of the costs of such action” pursuant to a settlement agreement with the government “may seek contribution from any person who is not party to a settlement.” Id. at 1113. In response, ARCO filed a motion for summary judgment, arguing Asarco’s action was untimely because it was not filed within the CERCLA-imposed three-year statute of limitation after entry of the judicially approved RCRA decree. Id. at 1115.

Using canons of statutory construction, legislative history, the statute’s broad remedial purpose, and EPA’s own interpretation, the court first came to the “inexorable conclusion that Congress did not intend to limit [section] 113(f)(3)(B) to response actions and cost incurred under CERCLA settlements,” and, therefore, held that a non-CERCLA settlement agreement may form the basis for a CERCLA contribution action. Id. at 1118–21. In arriving at this decision, the Ninth Circuit added to the current circuit split on this issue, siding with the Third Circuit and finding the Second Circuit’s alternative position unpersuasive. Id. at 1120 (comparing holdings in Trinity Industries, Inc. v. Chicago Bridge & Iron Co., 735 F.3d 131 (3d Cir. 2013) and United States v. Rohm & Haas Co., 2 F.3d 1265 (3d Cir. 1993), with Consolidated Edison Co. of N.Y., Inc. v. UGI Utilities, Inc., 423 F.3d 90 (2d Cir. 2005)).

The court then analyzed the language of the RCRA decree to determine whether the obligations the decree imposed on Asarco amounted to “response actions.” Id. at 1121. The court, acknowledging that “response actions,” as defined under CERCLA, cover a broad array of cleanup activities, emphasized numerous provisions in the RCRA decree that obligated Asarco to “implement interim remedial measures to ‘control or abate[] . . . threats to human health and/or the environment’, prevent or minimize the spread of hazardous waste ‘while long-term corrective measures were being evaluated’, remove and dispose of contaminated soil and sediment . . . , and implement[] ‘corrective measures’ to ‘reduce levels of waste or hazardous constituents.’” Id. These actions, as determined by the court, demonstrate that the RCRA decree did require Asarco to take response actions at the Site. Id.

The Ninth Circuit rejected the district court’s ruling that the statute of limitation barred Asarco’s action against ARCO, holding that Asarco’s claim was timely based on the subsequent CERCLA decree and not the RCRA decree. Id. at 1121–26. In reaching this conclusion, the court determined the RCRA decree did not resolve Asarco’s liability because it did not decide with “certainty and finality” Asarco’s obligations for at least some of its response actions or costs. Id. at 1125–26. Finding that determinations to resolve a party’s liability depend on a case-by-case analysis of the agreement’s terms, the court determined the RCRA decree’s release provision was limited to liability with respect to claims for civil penalties and did not resolve Asarco’s liability for its response actions or costs. Id. The court also noted multiple provisions in the RCRA decree that referenced Asarco’s continued legal exposure, including CERCLA liability for response costs, and preserved all of the government’s enforcement options. Id.

In contrast, the court found the CERCLA decree did resolve Asarco’s liability for response costs at the Site, and released Asarco from liability for all response obligations under prior settlements, including the RCRA decree’s corrective measures, in exchange for Asarco’s funding of the custodial trust accounts. Id. at 1127–29. Moreover, under the CERCLA decree, the government did not reserve any rights to hold Asarco liable beyond its payment obligations therein and capped financial obligations at the agreed upon $99,294,000. Id. at 1128. As a result, the court held that Asarco’s claim was timely based on the CERCLA decree, and vacated the district court’s ruling, remanding the case back to the district court for a determination of whether Asarco is entitled to compensation from ARCO, and, if so, in what amount. Id. at 1129.

This decision provides guidance for parties when drafting CERCLA settlement agreements and informs a party interested in seeking contribution that it should include language clearly releasing the party from liability for all obligations and costs and that it is not subject to ongoing remedial obligations. This decision encourages the use of express release acknowledgments and suggests eliminating provisions that preserve the government’s enforcement options, including the right to hold a party liable under another statute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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