Just When You Thought It Was Safe to Recycle Your Copy of Aviall – District Court Requires Liability under Section 107 Before Section 113 Claim May Proceed

A potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)[1] may not proceed with a contribution claim under CERCLA § 113 until it has either been found liable under CERCLA § 107 or unless a § 107 claim is currently pending against it. So says Judge Stephen Limbaugh of the Eastern District of Missouri, in an opinion issued in the case of Westinghouse Electric Co. v. United States.[2]

The Westinghouse decision is the latest in a long line of cases that had their genesis in the 2004 U.S. Supreme Court’s opinion in the case of Cooper Industries, Inc. v. Aviall Services, Inc.[3] and which ultimately culminated in a subsequent decision by the Supreme Court in Atlantic Research Corp. v. United States.[4] Under Aviall, the Supreme Court held that contribution under § 113 was only available to a party that had been the subject of a civil action under either § 106 or § 107.[5] A unanimous Supreme Court subsequently added a gloss on that opinion in Atlantic Research, holding that parties who voluntarily clean up contaminated property may sue to recover their cleanup costs from other PRPs under § 107(a). The saga generated by Aviall and culminating in the Atlantic Research decision and the subsequent application of those opinions by the Courts of Appeal has been chronicled in previous articles appearing in this newsletter.[6]

Factual Background

Westinghouse owns a site that was contaminated as a result of nuclear fuel processing activities conducted by a number of governmental and non-governmental parties.[7] After incurring substantial remediation costs, Westinghouse filed suit under CERCLA in 2003, seeking both cost recovery under § 107 and contribution under § 113.[8]

Westinghouse itself was named as a defendant in a case brought by the State of Missouri for natural resource damages. That case was dismissed, but the State subsequently brought another action against Westinghouse under § 107. A consent decree was proposed in that case in 2005, and the other defendants in Westinghouse’s 2003 action moved to intervene and oppose approval of the consent decree. The motion to intervene was granted and the intervenors argued that the consent decree should be rejected, based on the fact that it sought to regulate a site containing nuclear contamination, an effort that intruded on the pre-emption of that field by the Atomic Energy Act. The district court agreed with the intervenors and rejected the proposed consent decree and the case was voluntarily dismissed.[9]

The non-governmental defendants moved for dismissal of Westinghouse’s § 107 and § 113 claims, but withdrew their motion with respect to the § 107 claim in light of the Supreme Court’s and Eighth Circuit’s decisions in Atlantic Research. Before the motion could be decided, however, Westinghouse and the State of Missouri filed a consent decree in Missouri state court, which was entered on July, 3, 2008, purporting to settle matters under CERCLA, including the fact that Westinghouse was entitled to contribution under § 113, and that its remediation of the property was consistent with the National Contingency Plan.[10]

The Influence of Aviall and Atlantic Research on the Westinghouse Decision

The contribution issue decided by Judge Limbaugh was raised by the non-governmental defendants, who sought summary judgment with respect to Westinghouse’s pending § 113 claim. Recognizing the interplay between contribution claims, cost recovery actions and CERCLA settlements, the court framed the issue presented by the defendants’ motion as “relatively simple and straightforward: whether Westinghouse may bring or maintain a § 113(f) contribution claim in the absence of a pending § 107 suit, without having established liability in a former § 107 suit, or in the absence of an administrative or judicially approved settlement under CERCLA.”[11]

Judge Limbaugh noted that the Supreme Court’s decision in Aviall determined that contribution under § 113(f)(1) was available “only where the party bringing the action had been subject to a civil action under § 106 or § 107.”[12] The judge then went on to quote a critical passage from Aviall: “If a party has not been sued pursuant to § 106 or § 107, or ‘if a judgment never occurs,’ then the party may not bring or maintain a contribution action under § 113(f)(1).”[13] The judge also relied on the Supreme Court’s decision in Atlantic Research, noting that the Court in that case “explained that liability is central to the idea of contribution: ‘§ 113(f)(1) permits suit before or after the establishment of common liability[, and] a [party’s] right to contribution under § 113(f)(1) is contingent upon an inequitable distribution of common liability among liable parties.’”[14]

Section 113 also allows a party to seek contribution after it “has resolved its liability to the United States or a State … in an administrative or judicially approved settlement.”[15] The court pointed to this language to further support its conclusion that “resolution of CERCLA liability is a prerequisite to bringing a suit under § 113(f)(3)(B).”[16]

Four Bases for Contribution Each Rejected by Judge Limbaugh

Westinghouse maintained that there were four separate bases under which it was able to maintain its contribution action under section 113(f): (1) a 2002 Letter of Agreement between Westinghouse and the State of Missouri that formed the basis for payment of cleanup costs and which provided for a subsequent “more definitive agreement”; (2) the 2003 action by the State of Missouri; (3) the 2005 action by the State of Missouri; and (4) the consent decree between Westinghouse and the State of Missouri that was entered in state court. Judge Limbaugh rejected each of these “actions” as a basis for Westinghouse’s § 113 contribution claim.

First, the court held that Westinghouse was precluded from relying on the 2002 Letter Agreement between Westinghouse and Missouri as a basis for the § 113 claim. The non-governmental defendants argued that the Letter Agreement could not support a contribution claim as an administrative settlement “because it does not settle CERCLA liability and because it is not a settlement at all.”[17] In fact, Judge Limbaugh went on to state that “More importantly, however, the Letter cannot settle any CERCLA liability because the State has no authority to settle CERCLA claims apart from a specific agreement with EPA.”[18] Absent such authority, the Letter Agreement was not an administrative settlement that would allow Westinghouse to pursue its contribution claim.

Second, the court rejected both the 2003 case and the 2005 case as a basis for Westinghouse’s § 113 contribution claim, based on the fact that both cases were voluntarily dismissed. As a result, “[i]n neither case was any liability established.”[19] This cursory rejection of both of these prior lawsuits as possible support for Westinghouse’s contribution claim is somewhat curious in the face of the court’s acknowledgment that Aviall had allowed contribution claims “where the party bringing the action had been subject to a civil action under § 106 or § 107.”[20]

Westinghouse had relied on this language from Aviall and pointed to § 113(f)(1), which contemplates a contribution claim “during” a civil action, to argue that, so long as a civil action has been filed, a finding of liability was not a perquisite for a contribution claim.[21] The court responded that, “[w]hile this is correct for the case in which a civil action pursuant to § 106 or § 107 is pending, it makes no sense to apply this rule where the civil action has been dismissed. CERCLA liability must have been established in a qualifying civil action for a party to either bring or maintain a § 113(f)(1) claim after that civil action has been closed.”[22] Stated differently, “if a party is sued pursuant to § 106 or § 107 but a judgment … never occurs, then the party may not bring or maintain a contribution action under § 113(f)(1).”[23]

Finally, Judge Limbaugh rejected the state court consent decree as a “judicially approved settlement” that would have allowed Westinghouse’s contribution claim to proceed. The court stated that § 113 provides the federal district courts with exclusive original jurisdiction “over all controversies arising under [CERCLA].”[24] Judge Limbaugh concluded that, “the State of Missouri has no CERCLA authority absent express delegation by the EPA,”[25] and “[t]herefore, to the extent that the state court consent decree purports to establish CERCLA liability, it is null and void.”

Conclusion

As of the date of this article, it is not clear whether Westinghouse will seek interlocutory review of this decision. As a result, its ultimate precedential value remains unclear. While Judge Limbaugh’s requirement that “liability be established” in a § 106 or § 107 action may constitute a limited reading of § 113(f)(1) and a narrow construction of Aviall, until other courts follow his reasoning this opinion may be nothing more than an anomaly based on the unique factual circumstances where two previous § 107 cases were voluntarily dismissed prior to resolution. However, in the event this ruling is sustained on appeal or becomes a seminal case that other courts pick up on, Judge Limbaugh may have re-kindled some of the controversy that followed Aviall and which many practitioners hoped had been put to rest by the Supreme Court’s issuance of Atlantic Research.

For additional information contact Steve Jones or any other member of our Environmental Litigation practice group.