T doubts about traditional approaches to Protection Agency (EPA) - - PDF document

Environmental Alert

January 2005

Contribution Confusion Redux

By Michael David Lichtenstein, Esq. and Todd M. Hooker, Esq.

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wo recent federal court decisions raise doubts about traditional approaches to addressing and resolving issues

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contribution under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). First, the United States Supreme Court limited the parties who may bring a direct action for contribution under §113 of CERCLA. Cooper Indus., Inc. v. Aviall Services, Inc., WL 2847713 (Dec. 13, 2004). Second, a federal district court in New Jersey ruled that a PRP defending a CERCLA §113 action may not commence a third-party action against other PRPs for contribution. Reichhold, Inc. v. United States Metals Refining Co., v. Port Reading-Carteret, LLC, et al., Civ. Action No. 03-453 (D.N.J. Oct. 27, 2004).

Cooper Indus. v. Aviall Services

The Aviall case concerned four contaminated sites in Texas. Cooper Industries, Inc. (Cooper)

• wned and operated the sites for many years and

thereafter sold them to Aviall Services, Inc. (Aviall). Aviall subsequently determined that both it and Cooper had contaminated the sites when petroleum and other hazardous substances were released from underground storage tanks and other spills. Although the Texas Natural Resource Conservation Commission (TNRCC) informed Aviall that it was violating State law, neither the TNRCC nor the United Sates Environmental Protection Agency (EPA) took judicial or administrative measures to compel cleanup of the sites. Aviall eventually cleaned up the properties pursuant to Texas’ Voluntary Cleanup Program, and thereafter sued Cooper for contribution under both §107 and §113 of CERCLA. The district court dismissed Aviall's lawsuit ruling that Aviall had abandoned its §107 claim and could not advance a §113 claim because it was never sued by EPA under CERCLA §107 or §106. The Fifth Circuit initially affirmed the district court’s dismissal of Aviall's §113 claim, but subsequently reversed en banc reasoning that the last sentence of §113 (“nothing in the section shall ‘diminish’ any person’s right to bring a contribution action in the absence of a section 106 or section 107(a) action”) authorized Aviall’s statutory contribution claim against Cooper. The Supreme Court reversed the Fifth Circuit and affirmed the district court’s dismissal of Aviall’s

• claim. Justice Thomas, writing for a seven justice

majority, explained that the first sentence of §113, “the enabling clause that establishes the right of contribution, provides: ‘Any person may seek contribution . . . during or following any civil action under section 9606 of this title or under section 9607(a) of this title. . . .’” Justice Thomas then concluded that “[t]he natural meaning of this sentence is that contribution may only be sought

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subject to the specified conditions, namely, ‘during

• r following’ a specified civil action.”

Justice Thomas rejected the Fifth Circuit’s reliance on the third sentence of §113 writing that “[t]he sole function of the [third] sentence is to clarify that §113(f)(1) does nothing to ‘diminish’ any cause(s) of action for contribution that may exist independently of §113(f)(1). The sentence … does not itself establish a cause of action; nor does it expand §113(f)(1) to authorize contribution actions not brought ‘during or following’ a §106 or §107(a) civil action.” Justice Thomas also relied on the fact that §113 does not contain a statute of limitation for contribution actions that do not flow from either the date of judgment in a civil action (§113(g)(3)(A)) or the date of settlement (§113(g)(3)(B)). The Supreme Court left open the possibility that Aviall might proceed against Cooper by advancing a contribution claim under §107(a). While acknowledging that the federal courts of appeal have almost uniformly held that a private party that is itself a PRP may not pursue a §107(a) action against other PRPs for joint and several liability, the Court refused to address this issue - - preferring instead to remand the issue to the district court for further consideration. The Supreme Court also refused to decide whether Aviall may proceed with an “implied” right of contribution under §107(a), a reference to the contribution rights previously implied by federal courts from provisions of CERCLA and common law. Justice Ginsberg, in dissent, reasoned that the Supreme Court has already decided that §107(a) creates a right of contribution among private party PRPs in Key Tronic Corp. v. United States, 511 U.S. 809 (1994). Relying on this decision, Justice Ginsberg would have held that Aviall can recover under §107(a) a proportionate share of its costs from Cooper in an action for contribution. The implications of Aviall are potentially far

• reaching. It is now the law that private party PRPs

may not bring §113 actions without first being subjected to a CERCLA §106 or §107 action, or settling their liability with EPA. For some, this may serve as an incentive not to settle or participate in cleanups where a cooperating party is already conducting the work. In short, parties that prefer to “hide in the weeds” have been given another reason to continue to do so. Moreover, PRPs currently undertaking

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contemplating a voluntary or brownfields cleanup of contaminated property, even under the supervision of state or federal environmental authorities, must presume at present that they will not be able to maintain a CERCLA contribution action against other PRPs.

Reichhold v. USMRC v. PRC

Aviall was not the only important §113 decision to come down in recent weeks. In Reichhold, the United States District Court for the District of New Jersey ruled in an unpublished decision that a private party PRP who is sued under §113 for contribution cannot bring a third party complaint against other PRPs for contribution. Reichhold,

• Inc. v. United States Metals Refining Company et
• al. v. Port Reading-Carteret et al., Civil Action No.

03-453 (October 27, 2004). Reichhold, Inc. (Reichhold) sued United States Metals Refining Company (USMRC) for contribution under both CERCLA and the New Jersey Spill Compensation and Control Act (the Spill Act) for cleanup costs incurred pursuant to an agreement with the New Jersey Department of Environmental Protection (NJDEP) to remediate

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properties in and around Carteret, New Jersey. USMRC brought a third party complaint against Port-Reading Carteret (PRC) and others seeking contribution under CERCLA §113 and §58:10- 23.11f(a)(2) of the Spill Act. In dismissing USMRC’s third party complaint against PRC, the Court reasoned that under CERCLA and the Spill Act, USMRC was only severally liable to Reichold. As such, USMRC could only be liable to Reichhold for its proportionate or “fair share” of cleanup costs, and USMRC had no basis for seeking contribution from

• PRC. Stating the rule generally, the Court, quoting

the Third Circuit, reasoned “when there is no question that joint and several liability is lacking, [a] claim for contribution must then, as a matter of law, fail.” Reichhold does not address how this rationale will apply at a site where all of the parties are not financially solvent, i.e., where there is an “orphan share” of liability. And, as with the Aviall decision, by making it more difficult to pursue CERCLA §113 claims, Reichhold creates a disincentive for PRPs to participate in early settlement and encourages them to lay back and wait for other private parties to do the work, and then to argue

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what constitutes their appropriate “proportionate share.” Ironically, Aviall dictates that Reichhold’s §113 claim against USMRC should be dismissed.

Conclusions

Neither Aviall nor Reichhold limit a PRP’s right to seek contribution pursuant to applicable state law, as long as the party seeking contribution has incurred costs beyond it’s “proportionate share” of

• liability. In New Jersey, for example, the Spill Act

provides for a direct cause of action for such claims. It remains to be seen whether federal circuit courts will now permit a PRP to file a §107(a) action. PRPs contemplating or conducting voluntary cleanups should reevaluate the viability of pending

• r planned contribution claims against third

parties. If you would like to discuss the issues addressed in this Alert, please contact Michael David Lichtenstein of Lowenstein Sandler’s Environmental Law & Litigation Practice Group at 973.597.2408

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mlichtenstein@ lowenstein.com or Todd M. Hooker at 973.597.2420 or thooker@ lowenstein.com.