Categor(ies): CERCLA

CERCLA Lawsuit May Proceed

United States v. American Premier Underwriters, Inc.
No. 0-cv-03167-JF (E.D. Pa. Apr. 4, 2007)

Background

This lawsuit involves the attempt by the federal government to recoup some of its cost of cleaning up environmental pollution at a site located in Wellesley, Massachusetts, known as the Morses Pond Culvert Site. Materials were first deposited at the site in the 1890s and have evidently been leaching into the ground since then, polluting the surrounding waterways. Penn Central Transportation Company and predecessor railroad companies conducted rail operations at the site since around 1833.

In 1978, Penn Central and related companies emerged from bankruptcy. American Premier Underwriters (APU) is the present name of the entity that emerged from the reorganization. The final consummation order in the bankruptcy purported to release the new company from any liability for the pre-consummation activities of the debtor. However, under the law of the Third Circuit, claims arising under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) are not barred by a consummation order if the consummation order was entered after CERCLA was enacted. See In re Penn Central Transportation Company, 944 F.2d 164 (3d Cir. 1991) (Paoli Yard litigation).

APU argued that this case should be distinguished from Paoli Yard because the pollution involved here affects waters of the United States and gave rise to clean-up claims under the provisions of the Clean Water Act (CWA). APU noted that section 311 of that statute, 33 U.S.C. 1321, provides an almost identical remedy that the government might have asserted. According to this argument, since the CWA was enacted in 1972, the claims that the federal government is now asserting existed prior to the date of the consummation order and are, thus, barred. APU cited the decision in In re Chicago, Milwaukee, St. Paul & Pacific Railroad Company, 3 F.3d 200 (7th Cir. 1993) (Milwaukee Road II), which held that CERCLA claims arising post-consummation would be barred by a consummation order if sufficiently similar to claims that could have been asserted under other statutes enacted before the consummation order. The government urged the court to reject the Seventh Circuit precedent.

Holding

The court found the reasoning in Milwaukee Road II persuasive. It framed the critical issue is this case as being whether the government did, in fact, have a pre-consummation claim which it could have asserted prior to the consummation of the bankruptcy. If so, the claim now being asserted under CERCLA would be barred.

It is true that the CWA was passed in 1972. However, it was not immediately implemented. The statute authorized U.S. EPA to determine which pollutants, and at what levels, would be hazardous enough to require corrective action. EPA?s final regulations did not become effective until after the date of the consummation order. Therefore, there was no claim under the CWA available to the government prior to the consummation order that would have been barred by the consummation order.

APU argued that any delay in implementing the CWA was due to the government?s own action, but the court did not find this to be determinative. It therefore denied APU?s motion to dismiss the government?s action.

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Published by the National Association of Attorneys General with the cooperation and support of the Office of Enforcement and Compliance Assurance of the U.S. Environmental Protection Agency.

Paula Cotter
Chief Counsel for Environment