Break on Through[1]: Tenth Circuit Allows Non-Settling PRP To Intervene in CERCLA Settlement Proceedings

Strengthening a recent trend, the Tenth Circuit Court of Appeals has become the second federal Circuit Court to allow a non-settling potentially responsible party (“PRP”) to intervene in a CERCLA action in order to oppose entry of a Consent Decree if entry of the Decree would foreclose the PRP’s ability to seek contribution under the Superfund law.[2] In United States v. Albert Inv. Co.,[3] the Tenth Circuit ruled that when the government attempts to settle with fewer than all of the PRPs at a Site, non-settling PRPs may intervene by right in the proceedings. The Court dismissed fears that its decision would undermine CERCLA’s policies favoring settlement, and noted that courts have approved settlements in which non-settling intervenors have been allowed to participate.

The Tenth Circuit’s ruling shifts the precedential balance in cases of this type. Previously, the majority view was thought to be that non-settling PRPs had no intervention right. Now the Eighth and Tenth Circuits, the only two Circuit Courts to have addressed the issue, have ruled the other way. The Albert ruling and similar decisions may lead to greater participation in settlement proceedings by non-settling parties.

Background

The Albert decision arose out of EPA's attempt to recover the approximately $30 million it and the State of Oklahoma had spent remediating the Double Eagle Superfund Site, a waste oil disposal facility in Oklahoma City (the “Site”).[4] EPA had negotiated a $6.5 million settlement with forty-four parties that had sent oil to the Site for disposal.[5] To perfect the settlement, the Department of Justice filed a “friendly suit” – a lawsuit brought solely for the purpose of settlement – against the settling PRPs and immediately filed a Consent Decree for the Court’s review and approval. Following its usual policy, DOJ posted the proposed Consent Decree for comment.

A single party – Union Pacific Railroad Company – filed comments on the proposed Consent Decree. Union Pacific became the successor-in-interest to one of the Site’s former owners after a 2003 merger, and as such became potentially liable for all of the government's unrecovered cleanup costs.[6] In its comments,[7] Union Pacific claimed that it had been unfairly excluded from the settlement negotiation process, and that the proposed settlement was defective. Specifically, Union Pacific claimed that the Consent Decree was not based on a rational allocation of the settling PRP’s contribution to the contamination, undercounted the amount of waste that the settling PRPs had actually shipped to the Site, did not allocate any of the Site’s substantial orphan share[8] to the settling PRPs, and ultimately required the settling PRPs to pay substantially less than Union Pacific believed they owed.

Union Pacific's concern was not academic: the government also had brought a cost recovery suit against it,[9] and the company was in the process of defending itself and bringing contribution actions against other PRPs.[10] Although Union Pacific's total potential liability would be reduced by the value paid by the settling PRPs under the Consent Decree, a PRP that settles with the government via a Consent Decree is immune from contribution claims.[11] Union Pacific believed it could get more from the settling PRPs through a contribution claim than the government was getting in settlement, and so risked losing a substantial amount of money if the settlement were approved.

Receiving no response to its comments, Union Pacific moved to intervene in the settlement proceedings. In addition to its substantive complaints, the company claimed that the statute of limitations had run on the government’s claims against the settling PRPs, and that, therefore, the purpose of the settlement was not to resolve the PRPs liability to the government, but only to protect the settling PRPs from Union Pacific’s contribution claims.[12] The district court denied the motion and Union Pacific appealed to the Tenth Circuit.

The Albert Decision

The primary issue before the Circuit Court in Albert was whether Union Pacific had an interest in the settlement proceedings sufficient to satisfy the intervention requirements of Fed. R. Civ. Proc. 24(a)(2) and CERCLA § 113(i).[13] Under both the Federal Rules and the Superfund statute, a party may only intervene if it can show that it has “an interest relating to the property or transaction that is the subject of the action.”

Union Pacific's claimed interest was not in debate: it would lose its ability to bring contribution actions against the settling PRPs. However, courts have split on whether such an interest meets the intervention standard. In brief, a number of district courts have deemed a non-settling party’s interest in protecting its contribution rights to be too “speculative” and “remote” to satisfy the intervention standard, and have determined that allowing non-settling PRPs to disrupt settlement proceedings through intervention would undermine CERCLA’s pro-settlement policies.[14] On the other hand, several Courts had ruled the other way, declining to enter into an extensive examination of CERCLA policy when making what is essentially a procedural decision based on the Federal Rules.[15] For a thorough discussion of the conflicting rationales underlying this split, see Meline MacCurdy, “Let Me In: District Court Allows Non-Settling Parties to Intervene in CERCLA Consent Decree,” Marten Law Group Environmental News (Feb. 6, 2008).

In Albert, the settling parties argued that Section 113(f)(2) (protecting settling parties from contribution) converts the right in Section 113(f)(1) (providing for contribution) into a “qualified right” insufficient to support intervention.[16] The Court, “read[ing] § 113(f) as a whole,” found that “a contribution right exists until settlement with the government eliminates that right,”[17] and therefore is not “qualified,” but rather concrete and capable of protection through intervention.

The Tenth Circuit also rejected the proposition that Section 113(i) (providing for intervention in language nearly identical to Fed. R. Civ. Proc. 24(a)(2)) is ambiguous, and that in resolving any ambiguity, the Court should find that CERCLA’s legislative history indicates that non-settling parties should be denied intervention.[18] The Court noted that no party had identified what language, specifically, was ambiguous,[19] and ruled that to the contrary although the intervention standard is “very broad, a statute’s breadth does not make it ambiguous.”[20] The Court then took a step further, finding that even if it were to consider legislative history showing that CERCLA promoted early settlement, “[i]ntervention can be read consistently with a prompt settlement. … A brief delay for the court to consider a non-settling PRP’s interest is not inconsistent with a general goal of early settlement.”[21]

The Court also ruled that Union Pacific’s alleged failure to participate in settlement negotiations did not “diminish its right to intervene,”[22] and that Union Pacific’s earlier submission of comments was not an adequate substitute for intervention, because the government is free to ignore those comments and that decision is not appealable, but a district court may not ignore the same arguments and its decision is subject to appellate review.[23]

Conclusion

With two Circuit Courts now in agreement that non-settling PRPs may intervene as of right in settlement proceedings, it is possible that more non-settling PRPs will challenge settlement agreements. One interesting possibility (not discussed in the Tenth Circuit opinion) is that intervenors may raise the Supreme Court’s recent Burlington Northern decision to disrupt settlement approval. In Burlington Northern, the Supreme Court ruled that where there is a reasonable basis for apportionment, PRPs are only responsible for their own contributions to contamination (leaving the government holding the bag for any orphan share). For a complete discussion of the Supreme Court’s decision, see Brad Marten, “U.S. Supreme Court Holds That Superfund Liability Is Not Joint and Several Where A Reasonable Basis for Apportionment Exists; Court Also Narrows Arranger Liability,” Marten Law Group Environmental News (May 4, 2009). The decision might create issues where, as in Albert, the government allegedly failed to base its settlement on an apportionment formula. While further discussion will have to wait for a district court ruling, increased PRP intervention may bring that ruling sooner rather than later, creating another avenue for exploring the ramifications of the Supreme Court’s far-reaching opinion in Burlington Northern.

For more information on CERCLA or the Albert case, please contact Adam Orford or any member of Marten Law Group’s Waste Cleanup practice group.