Second Circuit Makes Summary Judgment More Difficult to Obtain for Defendants in CERCLA Contribution Actions

It is often said, that “Where you stand depends on where you sit.” PRPs facing CERCLA contribution actions will find themselves sitting uncomfortably following the Second Circuit’s decision last week in Niagara Mohawk Power Corp. v. Chevron USA, Inc.[1] By contrast, PRPs bringing such actions will be sitting pretty. The court held that a party seeking contribution “need not establish the precise amount of hazardous material discharged or prove with certainty that a PRP defendant discharged the hazardous material to get their CERCLA claims past the summary judgment stage.”[2] The court’s standard makes it easier for CERCLA plaintiffs to put a private contribution case into a settlement posture, and – conversely – makes it more difficult for CERCLA defendants to obtain early dismissal of contribution claims. Under the ruling, at least in the Second Circuit, “[s]ummary judgment is only proper when a defendant establishes it is not liable at all under CERCLA – namely, it is not a PRP under the statute, there is no plausible evidence that it discharged hazardous materials, or it is eligible for one of the three affirmative defenses available under § 107.”[3]

Factual Background

The property that is the subject of the Niagara Mohawk litigation, known as the “Water Street Site,” has been an industrial property for the last 100 years. It has also been the subject of litigation concerning the cleanup of the property for more than a decade. Niagara Mohawk (denominated “NiMo” by the Second Circuit) first brought cost recovery claims under CERCLA and various state law claims in 1998. The case has been up to the Second Circuit twice before, once after the Supreme Court’s decision in Cooper Industries, Inc. v. Aviall Services, Inc.,[4] and a second time after the Supreme Court’s decision in United States v. Atlantic Research Corp.[5]

NiMo owned portions of the Water Street Site from 1922 until 1951 and operated a manufactured gas plant on the Site. The plant produced coal tar, a hazardous substance under CERCLA, which was disposed of on-site. In 1951, NiMo sold most of its interests in the site to Republic Steel, retaining only a small portion of the site as a natural gas regulator station. A number of other PRPs were named in the litigation, based on either ownership of portions of the site or activities as operators or arrangers for the use and disposal of hazardous substances.[6]

In 1992, NiMo entered into an Order on Consent with the New York State Department of Environmental Conservation (DEC), which required NiMo to investigate 21 different sites within the state of New York that had once had gas plants on them. Under the Order on Consent, NiMo “resolved its liability to the State for purposes of contribution protection provided by CERCLA Section 113(f)(2).”[7] The Order on Consent required NiMo to undertake remedial investigations and feasibility studies at all sites where cleanup was required, which included the Water Street Site. After doing this work, NiMo sought recovery of its investigation and remediation costs.

Procedural Background

NiMo’s attempts to obtain summary judgment of liability against other PRPs were rejected by the district court. Instead, the district court granted summary judgment to one defendant (a current owner) based on the fact that NiMo failed to provide evidence that it had engaged in the appropriate inquiry when it purchased the property.[8] With respect to another defendant, the district court viewed NiMo’s expert testimony regarding releases of hazardous substances as “speculative.”[9] The district court also granted partial summary judgment in favor of a third defendant based on NiMo’s failure to provide evidence that its tenant had actually disposed of hazardous substances.[10] Finally, the district court found that NiMo failed to provide sufficient evidence of causation with respect to a fourth PRP, based on a lack of a nexus between the release of hazardous substances and NiMo’s cleanup costs.

All of these PRPs moved for entry of a final judgment pursuant to FRCP 54(b), while NiMo sought review of the district court’s decisions granting summary judgment of dismissal to these PRPs.[11] Coupled with the district court’s rejection of NiMo’s state law claims, all of NiMo’s claims were dismissed by the district court.

Second Circuit Clarifies Summary Judgment Standard in CERCLA Section 113 Contribution Cases

In reviewing these decisions, the Second Circuit noted the remedial nature of CERCLA, stating that “[t]he logic [of CERCLA] is straightforward and simple – Congress wanted owners and polluters to identify and clean up all hazardous waste they discover.… Recognizing, however, the practical difficulties of this statutory scheme, Congress also empowered the court through § 113 to use ‘such equitable factors as the court determines are appropriate’ to reach a just result.”[12]

The court enumerated the equitable factors that Congress specified courts to consider in apportioning costs, noting that “[w]hile these factors may seem relevant to a liability determination, CERCLA purposefully lowered the liability bar required to be a PRP.”[13] Pointing to its previous decision in United States v. Alcan Aluminum Corp.,[14] the court stated that:

The plain meaning of th[e statutory] language dictates that [a party seeking costs] need only prove: [] there was a release or threatened release, which [] caused incurrence of response costs, and [] that the defendant generated hazardous waste at the cleanup site. What is not required is that the government [or another authorized party] show that a specific defendant’s waste caused incurrence of cleanup costs.[15]

In light of CERCLA’s remedial goals and the low standard for liability, the court stated that “caution is appropriate when evaluating a motion for summary judgment to dismiss a claim against a PRP in a CERCLA case.”[16] It went on to say that “there is nothing objectionable in basing findings solely on circumstantial evidence, especially where the passage of time has made direct evidence difficult or impossible to obtain.”[17]

Court Relies on Bifurcation between Liability and Apportionment Phases as Justification for a Lesser Liability Standard

Because CERCLA cases are generally bifurcated into a liability and apportionment phases, “it is usually enough to show that a defendant was a responsible party within the meaning of 9607(a); that cleanup efforts were undertaken because of the presence of one or more hazardous substances identified in CERCLA; and that reasonable costs were expended during the operation.”[18] Quoting from the Ninth Circuit’s decision in A&W Smelter & Refiners, Inc. v. Clinton,[19] the court noted that “CERCLA … allows ‘broad discretion’ to impose liability on ‘anyone who disposes of just about anything.’”[20]

By contrast, during the apportionment phase, the relative strength of the parties’ evidence of liability becomes more relevant. Given these differences, the court held that, in deciding a motion for summary judgment, while

the party seeking contribution must, of course, establish that the defendants qualify as PRPs under the statute and must demonstrate that it is probable that the defendants discharged hazardous material, … it need not establish the precise amount of hazardous material discharged or prove with certainty that a PRP defendant discharged the hazardous material to get their CERCLA claims past the summary judgment stage. … Summary judgment is only proper when a defendant establishes it is not liable at all under CERCLA – namely, it is not a PRP under the statute, there is no plausible evidence that it discharged hazardous materials, or it is eligible for one of the three affirmative defenses under § 107.[21]

Conclusion

The Second Circuit’s summary judgment standard in CERCLA contribution cases will make it more difficult for PRPs to extract themselves in the liability phase. The Court’s reliance on authority from other circuits (the First Circuit and Ninth Circuit in particular) makes it more likely that this approach could be picked up by courts outside of the Second Circuit. In addition, the rationale for the ruling makes it potentially applicable in cases brought under section 107, as well as section 113.

For more information, contact Steve Jones or any member of our Waste Cleanup or Environmental Litigation practice groups.