National Environmental Enforcement Journal
Land Owner Who Voluntarily Remediated Property May Bring Suit Under Section 107(a) Against PRP
Metropolitan Water Reclamation District of Greater Chicago v. North American Galvanizing & Coatings, Inc.
No. 05-3299 (7th Cir. Jan. 20, 2006)
Metropolitan Water Reclamation District owns a parcel of land comprising approximately fifty acres in Forest View, Illinois. In the late 1940s, it leased the land to Lake River Corporation, a wholly owned subsidiary of North American. Lake River constructed a facility to store, mix, and package industrial chemicals on the site. The company stored chemicals there in large aboveground tanks. According to the complaint, over the years, the tanks leaked and spilled close to 12,000 gallons of industrial chemicals into the soil and groundwater. The complaint further alleges that these chemicals were “hazardous substances” as defined by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and posed an imminent danger to the environment. Metropolitan Water remedied the contamination and filed this lawsuit to recoup its costs.
The complaint asserted claims under section 107(a) and 113(f) of CERCLA; it also contained state law claims for nuisance and breach of contract. A default judgment of $1.8 million and future response costs was entered against Lake River when it failed to answer the complaint. The plaintiff then amended its complaint to add North American as a defendant and then realleged the CERCLA and state law claims. North American moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).
The district court began its discussion by distinguishing the two CERCLA claims being asserted. The court noted that the Supreme Court holding in Cooper Industries v. Aviall Services, Inc., 543 U.S. 157 (2004), foreclosed the remedy being sought by Metropolitan Water under section 113(f) because the plaintiff’s cleanup had been voluntary, not forced by a civil suit. It held, however, that a potentially responsible party (PRP) that had voluntarily cleaned up property had an implied right of contribution under section 107(a), notwithstanding its status as a strictly liable party under the statute.
After oral arguments, the appellate court invited comments from U.S. EPA; Lockheed Martin Corporation also submitted a brief as an amicus curiae.
The court began its discussion by briefly reviewing the history of CERCLA and its amendment under the Superfund Amendments and Reauthorization Act (SARA). After the passage of SARA, courts generally held that PRPs were precluded from seeking recovery under section 107(a) and, instead, had to bring a suit for contribution under section 113(f). Some courts carved out an exception to this general rule for landowners who allege that they were not responsible in any way for polluting a site. See, e.g., Rumpke of Indiana, Inc. v. Cummins Engine Company, Inc., 107 F.3d 1235, 1241 (7th Cir. 1997),
As the district court correctly pointed out, in Cooper Industries, Inc. v. Aviall Services, Inc., the Supreme Court held that contribution suits under section 113(f) could only be brought by a PRP if a civil enforcement action had been brought against it. However, the Court, in dictum, noted that section 113(f) was not the “exclusive cause of action for contribution available to a PRP.” 543 U.S. at 167. The Court did not expand on its statement.
Since a section 113 contribution claim is not available to a PRP such as Metropolitan Water, can such a “person” bring a lawsuit under section 107(a) for contribution? Both Metropolitan Water and amicus Lockheed urged the court to hold, as had the district court, that a right of action exists under section 107(a) for parties who have no right to contribution under section 113(f). They emphasized that the language in section 107(a)(4) states that CERCLA parties shall be liable for the government remedial and removal costs and for “(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan . . . .”
Under Metropolitan Water’s construction of the language of the statute, in order to go forward with its complaint, it need only show that it is a “person” under CERCLA and that it has incurred “necessary costs of response.” North American asserted, however, that the language of section 107(a)(4)(B) does not create a cause of action for “any other person.” EPA, in its brief, acknowledged that the subsection creates a cause of action for some private parties, but not for those who are among the four classes of PRPs listed earlier in section 107(a), such as Metropolitan Water. The agency interprets this section to refer only to a class of individuals who, by definition, is not a PRP for cleanup costs. Under this interpretation of the statute, Metropolitan Water, as a PRP landowner, would not have a right of action.
The court rejected North American’s interpretation that section 107(a) does not create a cause of action for a PRP such as Metropolitan Water. It pointed out that the Supreme Court in Key Tronic Corporation v. United States, 511 U.S. 809 (1994), stated that “§ 107 unquestionably provides a cause of action of private parties to seek recovery of cleanup costs.” Id. at 818. This position was reinforced in the Cooper Industries case when the Court reaffirmed Key Tronic’s recognition of a “cost recovery remedy of § 107(a)(4)(B)” that is “clearly distinct” from the contribution remedy in section 113(f)(1). 543 U.S. at 163 n.3.
Other courts addressing this issue after Cooper Industries have found that such a remedy is available. In Consolidated Edison Company of New York, Inc., v. UGI Utilities, Inc., 423 F.3d 90 (2d Cir. 2005), the Second Circuit held that parties such as Metropolitan Water may bring an action under section 107(a) for response costs incurred voluntarily. The Second Circuit’s reasoning was adopted by the Eighth Circuit in Atlantic Research Corporation v. United States, 459 F.3d 827 (8th Cir. 2006). However, a recent Third Circuit decision in E.I. DuPont De Nemours & Company v. United States, 460 F.3d 5415 (2006) held that the Supreme Court’s decision in Cooper Industries did not require it to revisit its prior holdings that “a PRP seeking to offset its cleanup costs must invoke contribution under § 113.” Id. at 528.
After reviewing these decisions, the court in this case found itself in agreement with the conclusion reached by the Second and Eighth Circuits as well as by the dissenting judge’s opinion in E.I. DuPont. The court looked at the plain language of subsection (B), finding that nothing in the language indicates that a PRP, such as Metropolitan Water, should not be considered “any other person” for purposes of a right of action. Thus, the plain language of the statute coupled with the Supreme Court’s continued recognition of an implied cause of action in section 107(a), convinced the court that the reasoning of the Second and Eighth Circuits was correct.
EPA argued that the word “other” should be read as distinguishing “any other person” from the four categories of PRPs listed in subsections (1) through (4) of section 107(a). The court disagreed. It read “other” as distinguishing “any other person” from the parties listed in subsection (A), the “United States Government,” a “State,” and an “Indian tribe”; these parties may recover costs “not inconsistent with the national contingency plan.” In contrast, the “any other person” referred to in subsection (B) may recover only those costs “consistent with the national contingency plan.” The court opined that the two subsections simply relax the burden of proof for governmental entities.
The court concluded that Metropolitan Water is a “person” within the meaning of section 107 and it has properly alleged that it incurred response costs. It also has alleged that it had not settled any liability with a government entity nor had it been the subject of a CERCLA suit for damages. These allegations place its cause of action under section 107(a).
The court also pointed out that recognizing a section 107(a) cause of action for PRPs that have voluntarily incurred costs is in line with the explicit savings clause found in section 113(f)(1). The last sentence provides: “Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [section 106] of this title of [section 107] of this title.” 42 U.S.C. § 9613(f)(1).
As a policy matter, the court noted that prohibiting lawsuits by voluntary plaintiffs might undermine CERCLA’s aims of encouraging expeditious, voluntary environmental cleanups while holding parties responsible for their polluting activities. EPA and North American countered that the United States could lose valuable settlement leverage if parties are allowed to bring an action under section 107(a) in these circumstances. Parties who settle with the United States receive protection from contribution suits by other parties. PRPs that choose not to settle are barred from seeking contribution and, thus, may face a disproportionate liability. According to this argument, allowing non-settling PRPs to sue under section 107(a) would discourage parties from settling with the United States. The court acknowledged that section 1113(f)(2) appears to reflect a congressional desire that PRPs be encouraged to settle their liability with the federal government. These concerns do not exist in this case since no agency, federal or state, has been involved in the cleanup undertaken by Metropolitan Water.
For the foregoing reasons, the court affirmed the judgment of the district court.
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.
Chief Counsel for Environment