No, That Doesn’t Settle It: U.S. Supreme Court Clarifies Which Types of Settlements Trigger CERCLA Contribution Rights
The complex and overlapping nature of the three different routes to recovering cleanup costs under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) has bedeviled courts for decades. This month, in Territory of Guam v. United States, the U.S. Supreme Court answered one very narrow question: What kind of a settlement with the government gives a settling party the right to bring an action for contribution against a non-settlor?
CERCLA provides three separate avenues for recovering some or all of your costs. Section 107 permits a party that has incurred cleanup costs to sue responsible parties for any “necessary costs of response incurred…consistent with the national contingency plan.” In addition to the Section 107 “cost recovery” action, the statute provides for two kinds of contribution actions. Section 113(f)(1) authorizes any person to seek contribution from other parties who are or may be liable “during or following any civil action” under Section 106 (which permits the government to order a cleanup) or Section 107. Even in the absence of such a civil action, a party can seek contribution under Section 113(f)(3)(b) if it has “resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement.” “Response action” has a specific meaning under the statute; it is CERCLA-speak for a cleanup, covering both “removal” actions that address immediate threats and “remedial” actions that implement a more permanent solution.
The question of whether to pursue cost recovery under Section 107 or contribution under Section 113 has generated considerable litigation and numerous decisions in the courts. Territory of Guam is the Court’s third foray into the Section 107/Section 113 thicket. In its 2004 decision in Cooper Industries, Inc. v. Aviall Services, Inc., the Court held that a “volunteer” who has not been sued under Section 106 or Section 107 could not seek contribution under Section 113(f)(1). Three years later, in United States v. Atlantic Research Corporation, the Court answered a question left open by Aviall in holding that such a “volunteer” could sue under Section 107.
The case before the Court here had its origins in the 1940s, when the Navy constructed the Ordot Dump and then allegedly used it as a dumpsite for toxic waste for decades. The United States later ceded control of the dump to Guam, which proceeded to use it as a public landfill. Predictably, the U.S. Environmental Protection Agency (EPA) determined that the dump posed unacceptable hazards and ordered Guam to clean it up. When Guam failed to do so, EPA filed suit, eventually resulting in a 2004 settlement that resolved the claims in EPA’s complaint, which were limited to claims under the Clean Water Act.
Fast forward to 2017, when Guam sued the United States under both Section 107(a) and Section 113(f)(3)(b), but its strategy of pleading both causes of action doomed its complaint. Applying a rule adopted by many circuits, the D.C. Circuit held that, because Guam could sue under Section 113(f), it was barred from also suing under Section 107. And because the three-year statute of limitations on its contribution claim had long since run, it could no longer seek contribution either. Having pled two paths to recovering cleanup costs, Guam now saw both paths blocked and sought review by the Supreme Court.
Writing for the Court (as he had in both Aviall and Atlantic Research), Justice Thomas concluded that Guam never had a viable contribution claim under Section 113(f) because its 2004 settlement did not resolve its liability under CERCLA. Reading Section 113(f)(3)(B) in the context of the rest of Section 113(f), and in the broader context of “CERCLA’s reticulated statutory matrix of environmental duties and liabilities” (perhaps an overly flattering description of CERCLA’s notoriously confusing text and structure), the Court held that the “liability…for some or all of a response action or for some or all of the costs of such action” resolved by a settlement must be CERCLA liability for that settlement to trigger a contribution right under Section 113(f)(3)(B). Guam’s 2004 settlement with EPA did not satisfy this requirement, because its scope was explicitly limited to Clean Water Act claims. Thus, because it never had a Section 113(f)(3)(B) contribution claim to begin with, Guam lives to fight another day, armed with its Section 107 cost recovery claim, which is no longer barred by the rule of “if you have a CERCLA contribution claim, you have only a contribution claim and cannot bring a Section 107 claim.”
Territory of Guam will require parties and practitioners to consider the advantages and disadvantages of different approaches to negotiating settlements with the government, in light of their specific goals and circumstances. A CERCLA-specific settlement can achieve finality (and protect the settling party both from future CERCLA claims from the government and from contribution claims from non-settlors) but may preclude a Section 107 claim, and will require the settling party to bring its Section 113(f)(3)(B) claim within three years. A more general settlement or a settlement limited to claims under other statutes may preserve the settling party’s Section 107 claim (assuming that party has incurred recoverable response costs and can bring the claim within the six-year limitations period for such claims) but will leave that party exposed to CERCLA claims by the government or other private parties. Helping the client to weigh these advantages and disadvantages will be an essential element of effective representation.