In a unanimous decision, the Supreme Court ruled that a party’s right to contribution claims under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) after entering into a settlement arises only when the settlement agreement resolves CERCLA-specific liabilities. This decision may call into question the effect of existing settlement agreements, the viability of ongoing contribution cases, and may revive the ability of some parties to bring Section 107 cost recovery claims.
CERCLA is the backbone for remediation of historical contamination sites. CERCLA imposes liability on individuals responsible for contributing hazardous substances to a particular site. Responsible parties subject to liability under CERCLA include previous owners, current owners, parties that arranged for the disposal of hazardous substances, and transporters who selected the site to which the hazardous substances are transported.
There are two primary, albeit mutually-exclusive, means of recovering remediation costs under CERCLA. The first is a cost recovery action under Section 107(a). Cost recovery actions allow a party who voluntarily incurs cleanup costs to recover “necessary costs of response” from other potentially responsible parties. One of the primary benefits of a cost recovery action is that the statute of limitations generally is six years. The second way a party can recover remediation costs is through a contribution action under Section 113(f). Unlike a cost recovery action, a contribution action generally has a shorter three-year statute of limitations, and can be brought only after a party has satisfied one of the statutory triggers giving rise to a right of contribution under CERCLA. One statutory trigger under Section 113(f)(2) is where a party has “resolved” its liability with EPA or a state via an administrative or judicially approved settlement. A lingering question had been whether a non-CERCLA settlement was sufficient to trigger a party’s Section 113(f)(2) contribution rights. Many Courts prior to Guam held that settlements pursuant to other statutes were sufficient.
In Territory of Guam v. United States, the Supreme Court held that a right to contribution under Section 113 requires a CERCLA-specific settlement. In this case, Guam and the United States were in a dispute over a former Navy disposal site (called the Ordot Dump), later used by Guam. EPA determined the site was an ecological hazard and sued Guam for discharging pollutants into U.S. waters without a permit under the Clean Water Act (“CWA”). Guam and EPA entered a consent decree to resolve this CWA violation in 2004 in which Guam agreed to pay a civil penalty and close the dump. Thirteen years later, Guam brought both a Section 107 cost recovery action and a contribution claim under Section 113 against the U.S. for the Navy’s past actions. The lower courts held that Guam’s Section 113 action was barred by statute of limitations and dismissed the case. Guam appealed to the Supreme Court arguing that, in fact, it never had a viable Section 113 action because the CWA agreement did not resolve s CERCLA-specific liability, presumably meaning Guam could try to bring a section 107 cost recovery action, or alternatively, bring a Section113 action in the future once it resolved its CERCLA liability with EPA.
The Supreme Court agreed with Guam and held that contribution actions require resolution of a CERCLA-specific liability. As such, Guam’s settlement of violations pursuant to the CWA did not trigger a right of contribution under CERCLA. However, the Court did not directly answer a second question – how much of a party’s CERCLA liability must be resolved before a Section 113 action is triggered. Justice Thomas alluded to how the Court may resolve this question when he wrote, “It would be rather odd to say that a party has ‘resolved its liability’ if that party remains vulnerable to a CERCLA suit.” This suggests that the Court may believe a settlement must fully resolve a party’s liability, but this could present a difficult problem for parties considering remediation at CERCLA sites can take years, or even decades, and parties may enter into agreements with EPA or a state for different stages of the remediation process.
The Guam decision could have far-reaching impacts on parties who have relied on past non-CERCLA settlement agreements as a basis for assessing rights of contribution and the applicability of CERCLA statutes of limitation. It also leaves unresolved how and to what degree a state statute must incorporate CERCLA by reference for a state settlement to quality as a trigger for contribution actions. Nor is it clear whether a party has triggered Section 113 if it only partially resolves its liability relative to a specific site, such as when a party enters into an agreement to perform a preliminary site assessment but does not address future potential remedial actions at the site. This decision also muddies the water – further – whether a party’s liability is “resolved” if EPA preserves certain CERCLA enforcement discretion in an agreement. Moreover, it could affect a party’s consideration of when to settle and obtain CERCLA contribution protection at the consequence of triggering CERCLA’s relatively short three-year statute of limitation for contribution actions.
Resolving CERCLA liability is a complex and lengthy process full of potential legal landmines that may catch a party by surprise many years down the road, and the Guam decision adds yet another layer of complexity. As such, anyone facing a potential enforcement action or civil liability involving a site containing historical contamination should consult with counsel at the earliest opportunity.
*This article was authored with the assistance of Summer Associate, Peyton Farley.