Categor(ies): CERCLA

CERCLA Preempts State Law Contribution Claims

New York State Electric & Gas Corporation v. FirstEnergy Corporation
No. 3:03-CV-0438 (DEP) (N.D.N.Y. May 11, 2007)

Background

New York State Electric & Gas Corporation (NYSEG) owns twenty-four parcels of land in upstate New York that were once utilized in the production and/or storage of manufactured gas. Such facilities generated contaminating byproducts that were often released into the soil and groundwater. When NYSEG commenced this lawsuit, it had already paid more than $27 million to address contamination at the sites and was aware that significantly more money would be required to completely clean up the areas. The clean-up activities that NYSEG had accomplished were in accordance with administrative consent orders that it entered into with the New York State Department of Environmental Conversation (NYDEC).

In this lawsuit, NYSEG sought to recover contribution from FirstEnergy for a part of its remediation costs. It claimed that the defendant was responsible as the corporate successor to Associated Gas & Electric Company (AGECO) that, until 1946, owned all of the stock of NYSEG and allegedly exercised considerable control over its operations. Thus, NYSEG alleged that AGECO was both an owner and operator of the contaminated facilities under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). NYSEG brought claims under section 113(f) of CERCLA and state law, including New York’s civil practice law.

The issue before the court at this time is a motion for summary judgment by the defendant alleging, inter alia, that NYSEG’s claim under the civil practice law (the CERCLA claim having been previously dismissed) is preempted under CERCLA.

Holding

Under section 1401 of New York’s Civil Practice Law, “two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought.” N.Y.C.P.L.R § 1401. The law also provides for the commencement of a separate action seeking contribution, as occurred in this case. N.Y.C.P.L.R. § 1403.

The contribution rule of section 1401 applies to both concurrent joint tortfeasors and to successive and even independent tortfeasors. The law has been interpreted expansively so that there is not even a requirement that the party from whom contribution is sought be potentially liable under the same theory as was asserted against the party seeking contribution.

Nonetheless, FirstEnergy argued that a claim for contribution under section 1401 must be based upon state law as the underlying theory of liability. Thus, it argued that, to the extent that NYSEG may be relying on CERCLA as the basis for liability, the New York contribution law is not applicable.

The court agreed that there are cases that seemed to recognize a rule that the source of liability under section 1401 must be grounded in state law. However, in the case of Too, Inc. v. Kohl’s Department Stores, Inc., 213 F.R.D. 138 (S.D.N.Y. 2003), the court endorsed the use of section 1401 to recover contribution for violation of rights under the Copyright Act. In those cases where the courts have found that section 1401 was not applicable, the federal law involved encompassed within them wholly integrated remedial provisions. In the court’s view, those cases requiring liability based on state law are better understood as presenting questions of conflict preemption rather than standing for the proposition that a section 1401 claim can never be based on liability under federal law.

These contribution claims under section 1401 require some form of compulsion in that the party seeking contribution must have been compelled to make the payment for which contribution is sought. In this case, there has been no judgment entered requiring NYSEG to pay the clean-up costs incurred at the sites in question. However, it has been the subject of administrative orders issued by the NYSDEC. Although these orders are consensual, the expenditure of funds under such orders represents the satisfaction of a tort-like liability for environmental damage to property. See Consolidated Edison Company of New York, Inc. v. UGI Utilities, Inc., 423 F.3d 90, 101 (2d Cir. 2005).

NYSEG’s ability to recover contribution of some of the monies expended under compulsion from the administrative orders must be premised upon the extinguishment of liability, shared with FirstEnergy, for the same injuries. FirstEnergy has argued that contribution is not available since NYSEG did not extinguish its liability under CERCLA. The court agreed that there is nothing in the record to suggest that New York, in this case, was acting pursuant to delegated authority from U.S. EPA. However, that fact is legally insignificant since the theory of liability which a party could assert need not be common to both parties. Thus, the fact that NYSEG’s liability arose under a state environmental law, whereas that of FirstEnergy may be predicated upon CERCLA or on state statutory or common law, is not determinative.

FirstEnergy also argued that, even if NYSEG were able to make the showings necessary under section 1401, any such claim would be preempted. In response, NYSEG, pointed to express language in CERCLA which shows congressional intent that state laws addressing environmental injury are not subject to preemption. In Bedford Affiliates v. Sills, 155 F.3d 416, 427 (2d Cir. 1998), the court concluded that “CERCLA preempts the state law remedies of restitution and indemnification.” Some courts have held, based on the decision in Bedford Affiliates, that contribution claims asserted under section 1401 in situations such as the one in this case are preempted by CERCLA.

The court concluded that the pivotal inquiry is whether the plaintiff’s maintenance of a section 1401 contribution claim is precluded by conflict preemption. In the Second Circuit, a PRP voluntarily cleaning a site, but not yet sued, may seek cost recovery from other potentially responsible parties (PRPs), subject to the right of the PRP to counterclaim under section 113(f) for contribution. The court concluded that, since resort to a contribution claim under section 1401 would potentially undermine this scheme and permit the recovery of double damages or contribution when none is available under CERCLA, the contribution claims are precluded by conflict preemption.

The court, thus, ordered that the defendant’s motion for summary judgment regarding the section 1401 claim be granted.

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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