State Law Claims and CERCLA Remedial Actions: Making the Best of a Bad Decision

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The U.S. Supreme Court recently announced a landmark decision under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Act), also known as the Superfund program. In the case of Atlantic Richfield Co. v. Christian, Case No. 17–1498 (ARCO), the Court made the following key holdings:

  • State courts are not stripped of jurisdiction over claims related to Superfund remedial actions that arise under state law, even if a requested remedy under those state law claims involves additional remedial activity (and by extension, greater potentially responsible party cleanup cost liability) above and beyond that which was already approved by the U.S. Environmental Protection Agency (EPA) under the Act.

  • Under the Act, the landowners of property where pollutants have come to be located are potentially responsible parties (PRPs) and thus, pursuant to section 122(e)(6) of the Act, are required to obtain EPA approval for any remedial actions they wish to take separately and in addition to a remedial plan previously approved by EPA, even if the additional remedial actions are proposed only for their own private properties.

This article briefly examines the Court’s rationale for these key holdings and provides a potential strategy for PRPs to consider — to reduce the future risk of potential state-law claims seeking additional remedial action, depending on the strength of the relationship between PRPs and agencies at a given Superfund site.

Case Background

ARCO involved the case of a defunct copper smelting operation in Butte, Montana. The smelters were originally operated by another corporation, the Anaconda Company, from the 1900s through the 1970s. This operation contaminated 300 square miles with arsenic and lead over the course of its lengthy service. ARCO later acquired Anaconda and its smelters, but eventually closed the facility in 1980. That same year, the Act was passed, and ARCO suddenly found the smelters and all of their associated contamination to be one of the first Superfund sites listed under the Act. ARCO also found itself liable as a PRP for all of the contamination Anaconda had produced over the better part of a century.

More than three decades and nearly a half-billion dollars of cleanup later, ARCO continued working with EPA on response actions under the Act. However, in 2008, 98 landowners with property affected by the contamination sued ARCO in Montana state court for common law trespass, nuisance and strict liability. Among the remedies sought were restoration damages for the contamination on their private property. To help establish their eligibility for restoration damages under Montana law, the landowners proposed a restoration plan for which any recovered restoration damages would be used. The plan called for cleanup standards far more protective than EPA’s cleanup requirements under the Superfund program. As an example, as the U.S. Supreme Court pointed out on page six of the ARCO opinion, the landowners’ plan specified “a maximum soil contamination level of 15 parts per million of arsenic, rather than the 250 parts per million level set by EPA.” Page 11 of the respondent’s brief in the case discloses that the landowners chose the 15 ppm standard to match the “natural [background] level of arsenic in area soil.” Additionally, as stated in paragraph six of the opinion, the landowners also called for the treatment of “shallow groundwater through an 8,000-foot long, 15-foot deep, and 3-foot wide underground permeable barrier,” even though EPA previously “rejected [this] as costly and unnecessary to secure safe drinking water.” All told, including these and other additional requirements, the landowners stated that their proposed cleanup would cost ARCO around $50 to $58 million above and beyond its EPA-approved response costs.

The Montana Supreme Court found that the landowners’ claim for restoration damages had legal merit and was not preluded by the Act because the landowners’ plan was a challenge to the EPA-approved response plan. It also found that the landowners were not PRPs because they had not been treated as such during the entirety of the three-decade-plus cleanup, and the statute of limitations to bring claims against them as PRPs under the Act had expired. An appeal to the U.S. Supreme Court followed.

ARCO’s Key Holdings Explained

Regarding the first holding listed above, the U.S. Supreme Court held that state-law claims arising under state law are permissible as challenges to Superfund remedial actions because it could not find sufficient textual support in the Act for the notion that the Act bars such claims. In order for state courts to be stripped of jurisdiction by the Act, the Court stated that the claims must be brought under the Act in state court, interpreting section 113 of CERCLA. Claims arising under state law, such as common law nuisance, trespass or strict liability, do not arise under the Act. Moreover, even though one of the requested remedies under the state law claims involved additional remedial action that even the U.S. government stated could interfere with the approved Superfund response cleanup (see page 21 of the opinion), the Court focused on the nature of the claim, not the remedy. Additionally, the Court reasoned that the conflict with existing approved remedial activity would only come to the fore if and when EPA approved the conflicting plan.

For the second key holding, the Court reached this conclusion through a review of the Act’s definition of “covered persons,” or persons potentially subject to liability under the Act, and its relationship to other definitions within the Act. The Court stated that the innocent landowners were owners of a “facility,” a property where pollutants had come to be located. Because pollutants may come to be located on the plaintiffs’ properties, albeit without their consent or knowledge, the landowners fell within the PRP definition. Crucially, though, whether or not a party is ultimately liable for cleanup costs is not determined solely by PRP status. PRPs with valid defenses to liability (such as innocent landowners) are still PRPs; as the Court stated on page 15 of the opinion, such a broad reading is consistent with the Act’s goal of comprehensive environmental cleanup.

However, the Court went further, discussing whether innocent PRP landowners may conduct their own remediation under the Act beyond EPA-approved remedial actions at a Superfund site. The Court held that the landowners can take such action, but only if the landowners first obtain EPA approval for the additional remedial work, since they are PRPs under the Act. The Court explained that this reading was in line with the remedy approval requirements of section 122(e)(6) of the Act. PRPs without defenses to liability, such as ARCO, can then be held liable for the costs of the additional remedial activity.

Recommendations in Response

At the outset, we note that all Superfund sites are unique. Each presents a different history, and different relationships with the agencies and nonparticipating parties involved at a site. These differences need to be carefully considered with respect to strategy decisions at a specific site in response to the U.S. Supreme Court’s decision in ARCO. However, the case does raise new global questions to be considered before entering into cleanup decisions and settlements at any site — how can settling PRPs lower the risk of subsequent state-law challenges to the remedy after a Superfund remedy is approved and cleanup is underway by the settling PRPs? How can liable PRPs accurately predict their potential cost liability if innocent landowner PRPs can, at any later time, bring state-law claims or seek and obtain approval for additional remedial actions above and beyond the approved EPA remedy?

First, realize that not all states have a “restoration damages” claim akin to Montana’s. Part of the novelty of this case, and likewise its functional limits on future CERCLA remedial actions, rests on the fact that a state-law claim provided an important catalyst for these holdings.

In a state with a similar remedy, one potential solution is to consider working with the agency to solicit the involvement of the affected innocent landowner PRPs early on in the Superfund remedy process. If there is a good working relationship between the PRPs and regulators, taking the extra step to actively involve affected landowners at an early stage will allow the innocent landowners an opportunity to be heard and have their concerns considered before a remedy is finalized or before a settlement agreement is finalized. This has the benefit of making innocent landowners feel heard by the agencies and settling PRPs, potentially lowering the risk of future challenges to the remedial action under state law, as well as lowering the incidence of individual cleanup efforts by those landowners, which, if approved by EPA, could increase the PRP’s overall cleanup costs. It would also demonstrate to any future state courts hearing a challenge to the remedy that the agency along with the PRPs made a good-faith effort to address the issue before the EPA remedy was even selected, which could prove useful in any future action. If the innocent landowners are heard on the record and the agency rejects their cleanup proposals, future landowner lawsuits seeking such proposed cleanups and associated cost recovery may be more difficult to maintain.

One potential drawback to this solution would be the increase in negotiation time and costs resulting from the involvement of the innocent landowners, but the future costs saved could more than offset the additional upfront costs. Of course, at certain sites, where the relationship between PRPs and the agencies is more confrontational, the efforts to include the innocent landowners at the negotiation stage could do more harm than good. Choice of negotiation strategy notwithstanding, keep the Act’s section 122(e)(2) response activity/enforcement activity moratorium in mind when conducting negotiations, and take a proactive approach toward requesting extension of those deadlines from EPA if the need arises.

At the end of the day, one thing is clear: ARCO has further muddied the waters around CERCLA litigation, and it will be some time before the full ramifications are known. For those PRPs actively negotiating remedies with EPA, consider what you can do right now to mitigate the potential for future state-law challenges to the remedy resulting from the decision by engaging your legal counsel on this issue.

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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