Supreme Court Asked to Resolve Interplay Between CERCLA Cost Recovery and Contribution Provisions

The Supreme Court is considering a petition for review regarding the interplay between CERCLA Sections 107 and 113, the law’s cost recovery and contribution provisions. The petition for certiorari in Solutia, Inc. v. McWane, Inc. asks the Supreme Court to reverse a recent Eleventh Circuit ruling[1] that a party with a viable Section 113 contribution claim may not also seek recovery under Section 107, even when that party has incurred costs voluntarily under a consent decree.

The issue is an important one for environmental law practitioners and their clients who are considering whether to comply with an order under CERCLA Section 106 or to enter into a CERCLA consent decree. If by doing either one—as the Eleventh Circuit held—such parties are limited to recovery under Section 113, they risk becoming unable to recover from other parties who settle with the United States, unable to impose joint and several liability on other responsible parties, and unable to bring actions at all under a potentially more onerous statute of limitations.

The issue was touched on, but left undecided, by two earlier Supreme Court decisions, Cooper Industries, Inc. v. Aviall Services, Inc.[2] and United States v. Atlantic Research Corp.[3] Neither case resolved whether the two statutory provisions are mutually exclusive or can be pled in the alternative. Interestingly, the Seventh Circuit also raised (but did not resolve) the issue in a very recent decision, United States v. NCR,[4] which at the very least lends credence to the Solutia petitioners’ assertion that the state of the law is unclear.

Legal Background

The Supreme Court’s decisions in Aviall and Atlantic Research answered two specific questions, but left little guidance as to how to resolve the question at issue in Solutia. In Aviall, the Court ruled that the plain language of Section 113(f) foreclosed parties who had not already been sued from bringing a contribution action.[5] The Aviall decision left untouched numerous circuit decisions that had held that Section 113 was the sole avenue of cost recovery for private parties, i.e., that Section 107 was not available to them, which, combined with Aviall’s denial of the Section 113 remedy, would have severely limited the ability of private parties to recover response costs.

The Court revisited these issues in Atlantic Research, ruling that a party who had voluntarily incurred response costs but had not been sued could bring a cost recovery action against other potentially responsible parties (“PRPs”) under CERCLA Section 107(a).[6] The Court also addressed the government’s arguments that permitting private parties to recover under Section 107 would “effectively allow[] PRPs to circumvent [Section 113’s] shorter statute of limitations … [and to] eschew equitable apportionment under [Section 113] in favor of joint and several liability under [Section 107],” and that the ruling “eviscerates the settlement bar set forth in § 113(f)(2).”[7] The court dismissed the government’s concerns in a discussion of the differences between Sections 107 and 113.[8] However, as one court explained, notwithstanding these rulings, the Supreme Court’s decisions “have done little to provide the lower courts with useful guidance in determining which subsection of CERCLA provides a cause of action for parties seeking reimbursement of response costs in differing situations.”[9] As Justice Thomas put it in Aviall, after the 1986 amendments to CERCLA, “CERCLA provided for a right to cost recovery in certain circumstances [Section 107] and separate rights to contribution in other circumstances [Section 113].”[10] The question ever since has been which circumstances.

One important unresolved question is the issue raised by Solutia: the rights to recovery available to parties who have incurred costs that are “compelled” by a consent decree or administrative order.[11] The Atlantic Research court specifically noted the issue and declined to rule on it:

We do not suggest that §§ 107(a)(4)(B) and 113(f) have no overlap at all. For instance, we recognize that a PRP may sustain expenses pursuant to a consent decree following a suit under § 106 or § 107(a). In such a case, the PRP does not incur costs voluntarily but does not reimburse the costs of another party. We do not decide whether these compelled costs of response are recoverable under § 113(f), § 107(a), or both. For our purposes, it suffices to demonstrate that costs incurred voluntarily are recoverable only by way of § 107(a)(4)(B), and costs of reimbursement to another person pursuant to a legal judgment or settlement are recoverable only under § 113(f). Thus, at a minimum, neither remedy swallows the other, contrary to the Government’s argument.[12]

The Solutia Case

For a deeper discussion of the background of the Solutia case, see S. Jones, Parties Seeking Contribution Under CERCLA May Not Bring a Simultaneous Cost Recovery Claim, Marten Law Environmental News (Mar. 19, 2012).

Factual Background

The Solutia case arose from contamination at a Monsanto plant in downtown Anniston, Alabama. EPA brought an enforcement action against Monsanto’s successor, Solutia & Pharmacia (Solutia), in 2002, and Solutia entered into a partial consent decree (“PCD”) with EPA in August 2003. During cleanup, it was discovered that numerous areas were contaminated by historic foundry wastes used as fill. The PCD retained Solutia’s right to seek contribution from those parties for related cleanup costs.

Two years later, based on information provided by Solutia, EPA entered into a separate settlement agreement with numerous parties that Solutia had already sued.[13] EPA accepted reimbursement and the parties’ agreement to continue cleanups, in exchange for contribution protection against Solutia.[14] In Solutia’s words, the net effect of the settlement was to “trade[] [Solutia’s] cleanup claims against the [settling parties] in order to get [the settling parties] to take over EPA’s portion” of the cleanup.[15] Notwithstanding the court’s willingness to vacate the PCD given Solutia’s changed circumstances, Solutia declined.[16]

Having settled with the government, the settling PRPs that Solutia was suing moved to dismiss Solutia’s claims, arguing that contribution claims were barred by the settlement and that Solutia, as a liable party with a consent decree compelling its work, could not pursue claims under Section 107. After initially dismissing Solutia’s Section 113 claims but preserving its Section 107 claims, the magistrate judge vacated his ruling and entered summary judgment against Solutia on its Section 107 claims as well. The judge based his decision on cases decided since Atlantic Research, finding that, because the PCD and stipulation between Solutia and EPA provided Solutia with contribution rights under section 113(f), it could not seek to recover those same costs under section 107(a).

The Eleventh Circuit’s Decision

On appeal, the Eleventh Circuit concluded that a Section 113 claim precludes a Section 107 claim. In doing so, the court rejected Solutia’s argument that there is no language in either section that suggests that Section 107(a) and Section 113(f) are mutually exclusive remedies, finding that the statute had to be “read as a whole” and that, in doing so, it was apparent that the remedies are “clearly distinct”: “If a party subject to a consent decree could simply repackage its § 113(f) claim for contribution as one for recovery under § 107(a), then the structure of CERCLA remedies would be completely undermined.”[17] This would also allow circumvention of the differing statutes of limitation, as well as thwarting the contribution protection provided to defendants who had settled with EPA.[18]

The Cert Petition

Following the Eleventh Circuit’s decision, Solutia petitioned the Supreme Court for review. The Court accepts cases only “for compelling reasons,” including but not limited to situations where the circuit courts are in disagreement “on some important matter” (a circuit split), or where the case at issue has “decided an important question of federal law that has not been, but should be, settled by this Court, or has decided an important federal question in a way that conflicts with relevant decisions of this Court.”[19] Solutia’s petition focuses largely on this last requirement, arguing that the question presented—whether parties in Solutia’s situation, having incurred response costs under a consent decree, may bring claims against other PRPs under Section 107—is an important question left open by Aviall and Atlantic Research, which the lower courts have gotten wrong.

In support of its petition, Solutia has offered three broad arguments. First, Solutia argues that the Eleventh Circuit, and the other circuit courts with which the Eleventh Circuit agreed, have elevated policy considerations over CERCLA’s clear statutory text.[20] In concluding that parties incurring response costs under a consent decree could only seek cost recovery against other parties who had already settled with the United States under Section 113(f), the Eleventh Circuit had relied primarily on the perceived policy benefits of that decision, with only the most general reference to reading the statute “as a whole” and keeping Section 107(a) and Section 113(f) remedies “clearly distinct.” But, Solutia points out, the Supreme Court’s decisions in Aviall and Atlantic Research both relied entirely on the plain meaning of the statutory text. Just so, Solutia argues, Section 113 “provided that PRPs ‘may seek contribution’ under § 113(f) … not that they may only seek contribution under that subsection.”[21]
 
Solutia next argues that, even lacking a clear circuit split, the question of whether costs incurred under a consent decree are recoverable under Section 107, Section 113, or both, is causing “extensive confusion among the courts, parties considering entering into agreements to conduct cleanups, and the United States.”[22] The thrust of Solutia’s discussion of the relevant precedents is that the majority of the Section 107/113 jurisprudence rests on “truly strained logic” and ephemeral distinctions between the types of parties who deserve various remedies. Solutia then makes its own policy argument: that the overriding purpose of CERCLA is to promote quick and efficient cleanups, and that denying recovery to parties in Solutia’s position has the consequence of forcing parties to refuse to settle their CERCLA liability and commence cleanups.

This leads directly to Solutia’s third point in support of its petition: that the suit raises an issue of exceptional importance worthy of resolution by the Supreme Court.[23] Here, Solutia turns to an unlikely ally—the United States itself, in its petition for certiorari in Atlantic Research. There, the government stressed the central importance of voluntary cleanup actions to CERCLA’s administration and effectiveness, and offered that parties were devoting resources to litigation that would otherwise be spent on cleanups, in a situation that “may be deterring PRPs from entering into settlements with the government.”[24] “That statement,” concludes Solutia, “is just as true today as it was in 2006.”[25]

The Seventh Circuit’s Decision in United States v. NCR

Barely two weeks after Solutia filed its petition for Supreme Court review, the Seventh Circuit issued a decision, United States v. NCR,[26] that suggests the Solutia court might have over-stated the dichotomy between those who can bring contribution or cost recovery claims. In NCR, the petitioner had incurred substantial cleanup costs related to PCB contamination in the Fox River in Wisconsin after entering into consent decrees and complying with a UAO. In a related case, the district court rejected NCR’s Section 107 claim on the grounds that the availability of a Section 113 claim precludes resort to Section 107.[27]

At issue in the Seventh Circuit appeal was NCR’s defense to a preliminary injunction, where the United States sought—for the second year in a row—to require NCR alone to conduct the cleanup at the site, despite the availability of multiple other liable parties. Although the court affirmed the district court’s grant of a preliminary injunction, it opined in dicta that NCR might be able to pursue recovery of its costs through Section 107 and 113 claims in tandem. The Seventh Circuit observed that a Section 107 claim “may be sought by a potentially responsible party that has not yet been the subject of any government enforcement action or admitted liability.”[28] Further, the court opined that the Supreme Court “intimated that” Section 107 and 113 “may not always be mutually exclusive,” thereby leaving “some aspects” of the interplay between 107 and 113 “up in the air” and creating confusion and conflict with the circuit courts.[29] The court concluded that, because the issue was not before it, it was “an open question whether, and if at all to what extent, NCR might be able in future legal proceedings to recoup any costs it should not have paid,” an issue that NCR is “free to explore” in a later appeal.[30]

Conclusion

On August 21, 2012, immediately before this article was published, several respondents filed an opposition to Solutia’s cert petition. The petition is currently scheduled for conference on September 24, 2012.

For more information, please contact Meline MacCurdy or Adam Orford, or any other member of Marten Law’s Litigation practice group.