PRPs No Longer Up Pinal Creek as Ninth Circuit Overturns 10-Year-Old Precedent

Adopting the logic of the Supreme Court’s opinion in United States v. Atlantic Research Corp.,[1] the Ninth Circuit Court of Appeals has affirmed the right of potential responsible parties (“PRPs”) to pursue cost-recovery of voluntarily-incurred cleanup costs under CERCLA Section 107(a).[2] In issuing the opinion, the Ninth Circuit overruled its prior opinion in Pinal Creek Group v. Newmont Mining Corp.,[3] under which the Ninth Circuit had limited PRPs to pursuit of contribution claims under CERCLA Section 113 for more than ten years.

Underlying Cases

The opinion was issued in the consolidated cases of Koutrous v. Goss-Jewett Co. and Adobe Lumber, Inc. v. Hellman.[4] In both of those cases, plaintiffs who had voluntarily incurred costs to clean up contaminated property had sued other parties for recovery of those costs.

Koutrous cleaned up perchloroethylene (“PCE”) on its property deposited by a dry cleaning supply company, which had accidentally released the PCE. After the supply company failed to follow a cleanup order issued by the California Regional Water Quality Control Board, Koutrous undertook the cleanup and then sought recovery of its costs pursuant to Section 107(a).[5] In Adobe Lumber, the plaintiff was the owner of the Woodland Shopping Center. After a previous tenant released PCE on the property, Adobe sought cost recovery and contribution for its costs investigating the contamination.[6]

In Koutrous, the district court dismissed the plaintiffs’ Section 107 claims but then certified an interlocutory appeal,[7] while in Adobe, the district court allowed the plaintiffs to proceed with cost recovery claims under Section 107.[8]

Ninth Circuit’s Pinal Creek Opinion Previously Barred Contribution Claims under Section 107

With the adoption of the Superfund Amendment and Reauthorization Act (“SARA”) in 1986, Congress adopted CERCLA Section 113, providing for a right of contribution between PRPs. In Pinal Creek, the Ninth Circuit held that the SARA amendments demonstrated Congress’ intention to limit PRPs to contribution actions under Section 113: “[A] PRP is not entitled to recovery all its response costs from other PRPs, but instead is limited to asserting a claim for contribution.”[9]

The Ninth Circuit qualified this position somewhat in Western Properties Service Corp. v. Shell Oil Co.,[10] holding that Section107(a) would allow non-polluting PRPs to pursue cost recovery, though PRPs who had contributed to contamination “were limited to bringing a contribution action governed by § 113.”[11]

Some District Courts within the Ninth Circuit Had Previously Allowed Contribution Claims under Section 107

Following the Supreme Court’s decision in Cooper Industries, Inc. v. Aviall Services, Inc.,[12] parties that had not been sued under Sections 106 or 107 were barred from seeking contribution under Section 113, though the Court did not address whether those parties had an implied cost recovery right under Section 107(a).

Even before the Supreme Court’s opinion in Atlantic Research, some district courts within the Ninth Circuit had found that an implied cost recovery claim did exist under Section 107(a). For instance, in the case of McDonald v. Sun Oil Co.,[13] the District of Oregon held that pursuit of a contribution action under Section 107 was consistent with the Ninth Circuit’s opinions in Western Properties and Pinal Creek. Quoting the opinion in Western Properties, the court stated that the Ninth Circuit held that “’the enactment of § 113 in 1986 did not replace the implicit right to contribution many courts had recognized in § 107(A); rather, § 113 determines the contours of § 107, so that a claim for contribution requires the “joint operation” of both sections.’”[14]

The McDonald opinion, issued in 2006, was not the first case within the Ninth Circuit to allow contribution claims to proceed under Section 107, as the underlying cases in Koutrous and Adobe Lumber had arisen in the Ninth Circuit. In both Koutrous and Adobe, the Eastern District of California had held that, because the U.S. Supreme Court’s opinion in Aviall had not addressed the issue of whether a potentially responsible party may maintain a claim for contribution under Section 107, Ninth Circuit precedent was controlling. Relying on Pinal Creek and Western Properties, the district court held that, even though a potentially responsible party could not maintain an action under Section 107 for joint and several liability, a claim for contribution was still viable under that section.[15]

Ninth Circuit Joins Other Circuit Courts in Applying Atlantic Research

In Atlantic Research, the U.S. Supreme Court addressed the question left open in its opinion in Aviall and held that Section 107(a) “provides … PRPs … with a cause of action to recover costs from other PRPs.”[16] Following Atlantic Research, the Third Circuit and Sixth Circuit have both allowed cost recovery claims to proceed based on that opinion.[17] The Second, Seventh and Eighth Circuits had already held that an implied cost recovery claim existed under Section 107 even prior to Atlantic Research.[18]

Despite these precedents from other circuits, when the issue was presented in Koutrous, the district court held that “Koutrous’ status as a PRP bars him from seeking any relief under § 107(a)” as “Pinal Creek held only that a PRP cannot maintain an action under § 107(a) for joint and several liability.”[19] Reviewing this language, the Ninth Circuit held that

Although the district court correctly interpreted our precedent as it existed at the time, Atlantic Research has changed the state of the law. The Supreme Court has made it clear that a PRP who has not been subject to a §106 or §107 action, like Koutrous, is not entitled to seek contribution under §113. Instead, he should proceed under § 107 for cost recovery.[20]

Conclusion

With its opinion in Koutrous, the Ninth Circuit joins the Second, Third, Sixth, Seventh and Eighth Circuits in allowing PRPs to pursue cost recovery under Section 107. Based on this ruling, volunteers who incur costs to clean up contaminated property may pursue recovery of those costs under CERCLA Section 107, even though not subject to an enforcement action under Sections 106 or 107.

For more information, please contact Steve Jones or another member of our Environmental Litigation Practice Group.