Wednesday, July 10, 2013

CERCLA 107 COST RECOVERY v 113 CONTRIBUTION: Part Two: the Circuit Courts Blurred the Distinctions Between Cost Recovery and Contribution After SARA

This is the second of a series of blog entries regarding the evolution of CERCLA §107 cost recovery claims and CERCLA §113 contribution claims.  It will show how circuit courts blurred the distinctions between cost recovery and contribution after SARA was enacted.  These distinctions were discussed in my first blog entry to this series, which discussed the pre SARA decisions cited in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157, 161-62 (2004).  The overarching argument of this series of blog entries is that cost recovery and contribution were distinct remedies prior to SARA, then the Circuit Courts blurred the distinctions between these two remedies, and now, starting primarily with Cooper Industries, the Supreme Court and other courts have begun restoring those distinctions that existed prior to SARA.

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) was passed in 1980, and at the time it was passed it did not explicitly provide a right to contribution. Cooper Industries, 543 U.S. at 162.  Prior to SARA, both a private right to cost recovery and a private right to contribution emerged through case law as distinct legal remedies. Id. at 161-62.  In 1986, Congress Amended CERCLA by way of the Superfund Amendments and Reauthorization Act (“SARA”) to explicitly provide for a right to contribution. Id. at 162. There are two CERCLA provisions that provide for contribution—CERCLA §§ 113(f)(1) and 113(f)(3)(B). 42 U.S.C. §§ 9613(f)(1), 9613(f)(3)(B).  CERCLA § 113(f)(1) provides, in relevant part, as follows:
Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a) of this title, during or following any civil action under section 9606 of this title or under section 9607(a) of this title… 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 9606 of this title or section 9607 of this title. 

42 U.S.C. § 9613(f)(1).  And CERCLA § 113(f)(3)(B) provides, in relevant part, as follows:
A person who 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 may seek contribution...

42 U.S.C. § 9613(f)(3)(B).
In short, after SARA, CERCLA provided for a right to cost recovery in certain circumstances, § 107(a), and separate rights to contribution in other circumstances, §§ 113(f)(1), 113(f)(3)(B).” Cooper Industries, 543 U.S. at 163.  “After SARA’s enactment… some Courts of Appeals believed it necessary to ‘direc[t] traffic’” determining which parties may assert a cost recovery claim and which parties may assert a contribution claim. U.S. v. Atlantic Research Corp., 551 U.S. 128, 132 (2007).
After SARA but before Cooper Industries, virtually every time a Court of Appeals considered the question of whether a particular PRP’s claim was one for cost recovery or contribution the result came back the same—its claim was for contribution not cost recovery. See Amoco Oil Co. v. Borden, Inc., 889 F.2d 664, 672 (5th Cir., 1989) (claim was one for contribution not cost recovery); Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764-65 (7th Cir., 1994) (same); United Techs. Corp. v. Browning-Ferris Indus. Inc., 33 F.3d 96, 103 (1st Cir., 1994) (same); United States v. Colorado & Eastern R.R. Co., 50 F. 3d 1530, 1536 (10th Cir., 1995) (same); Redwing Carriers, Inc. v. Saraland Apartments, 94 F.3d 1489, 1496 (11th Cir., 1996) (same); Bancamerica Commercial Corp. v. Mosher Steel of Kansas, Inc., 100 F.3d 792, 800 (10th Cir., 1996) (same); New Castle County v. Halliburton Nus Corp., 111 F.3d 1116, 1120 (3rd Cir., 1997) (same); Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1301 (9th Cir., 1997) (same); Sun Co. Inc. v. Browning-Ferris, Inc., 124 F.3d 1187, 1190 (10th Cir., August 14, 1997) (same); Pneumo Abex Corp. v. High Point, Thomasville & Denton R.R. Co., 142 F.3d 769, 776 (4th Cir., 1998) (same); Centerior Service Co. v. Acme Scrap Iron & Metal Corp., 153 F.3d 344, 351 (6th Cir., August 31, 1998) (same); Bedford Affiliates v. Sills, 156 F.3d 416, 423-24 (2nd Cir., 1998) (same); Axel Johnson Inc. v. Carroll Carolina Oil Co. Inc., 191 F.3d 409, 415-19 (4th Cir., 1999) (same); New Jersey Turnpike Authority v. PPG Industries, Inc., 197 F.3d 96, 104 (3rd Cir., 1999) (same); Morrison Enterprises v. McShares, Inc., 302 F.3d 1127, 1135 (10th Cir., 2002) (same); Dico Inc. v. Amoco Oil Co., 340 F.3d 525, 530 (8th Cir., 2003) (same).  The only exception was when a PRP could prove it was an innocent party—innocent even though liable. See, e.g., Rumpke of Indiana, Inc. v. Cummins Engine Co., 107 F.3d 1235, 1239-1242 (7th Cir., 1997).
At first, Court of Appeals cases holding that PRPs must use contribution were careful to note that contribution is a claim “by and between jointly and severally liable parties…” Akzo, 30 F.3d at 764; See also, Amoco Oil, 889 F.2d at 672 (“The hazard on the property constitutes an indivisible harm… [the contribution plaintiff] shares joint and several liability for remedial actions with [the contribution defendant].”); United Technologies, 33 F.3d at 99, 100 (“Contribution is a standard legal term that enjoys a stable, well-known denotation. It refers to a claim ‘by and between jointly and severally liable parties…’”; “[a] principal goal of the new section 9613 was to ‘clarif[y] and confirm[ ] the right of a person held jointly and severally liable under CERCLA to seek contribution…’”); Colorado & Eastern, 50 F. 3d at 1536 (“A principal objective of the new contribution section was to ‘clarif[y] and confirm[] the right of a person held jointly and severally liable under CERCLA to seek contribution…’”; “[w]hatever label [the claimant] may wish to use, its claim remains one by and between jointly and severally liable parties…”); New Castle, 111 F.3d at 1121 (“[the contribution plaintiff] did not seek to apportion its liability when it was sued by the United States, and it does not contend that the harm at the landfill is divisible, so this exception to pure joint and several liability [under CERCLA § 107] is not applicable here”; “the term ‘contribution’ is a standard legal term that refers to a claim ‘by and between jointly and severally liable parties…’”); Sun Company, 124 F.3d at 1190 (“The fact that Plaintiffs incurred cleanup costs by complying with a unilateral administrative order, without forcing the government to take them to court, does not change their status as jointly and severally liable parties… Plaintiffs' claim is still by and between jointly and severally liable parties...”); Bedford Affiliates, 156 F.3d at 423-24 (“Where the environmental harm is indivisible, multiple responsible persons will be jointly and severally liable for cleanup costs… As noted earlier, where multiple parties are responsible, joint and several liability attaches. Consequently, one potentially responsible person can never recover 100 percent of the response costs from others similarly situated since it is a joint tortfeasor...”).
Other cases from this same time period reinforce this principle.  For example, the Seventh Circuit declared, “[t]here can be no right to contribution unless there is joint and several liability…” Environmental Transportation Systems, Inc. v. Ensco, Inc., 969 F.2d 503, 508 (7th Cir., 1992); see also, United States v. Asarco, Inc., 814 F.Supp. 951, 956 n.4 (D. Colo., 1993) (“[I]f two parties are not jointly and severally liable because the harm is divisible… there is no common liability and therefore no right of contribution.”); County Line Inv. Co. v. Tinney, 933 F.2d 1508, 1515, 15 n.11, 1516 (10th Cir., 1991) (“Contribution is available under CERCLA because of the statute’s imposition of joint and several liability… Liability under CERCLA may not be joint and several, however, where the harm is divisible… contribution is only available where joint liability can be imposed.”).
However, somewhere along the line some Circuit Courts decided to adopted a general rule, which dropped the qualification that contribution requires joint and several liability, and held that all suits by and between PRPs are suits in contribution.  PRPs were precluded from seeking cost recovery. See Redwing Carriers, 94 F.3d at 1496, 1514 (“Redwing is a responsible party under CERCLA, and therefore, its claims against other allegedly responsible parties are claims for contribution;” further, the court stated, without citing any authority, that “[s]ince there is no joint and several liability among defendants in a contribution action, the divisibility defense has no relevance as a ‘defense’ in these cases.”); Bancamerica Commercial, 100 F.3d at 800 (“We have since held an action between potentially liable persons… to apportion [CERCLA] response costs between them is ‘the quintessential claim for contribution’ and proceeds pursuant to § 113 rather than § 107, regardless of how pled.”); Pinal Creek, 118 F.3d at 1301-02 (“Because all PRPs are liable under the statute, a claim by one PRP against another PRP necessarily is for contribution.”); Pneumo Abex, 142 F.3d at 776 (“The courts have held consistently that section [113] must be used by parties who are themselves potentially responsible parties… As the case before the court involves entirely potentially responsible parties, such parties must seek contribution under section [113].”); Centerior Service, 153 F.3d at 351 (“The plaintiffs are all PRPs, who have never asserted their innocence or challenged their liability under § 107(a). Pursuant to a § 106 order they had a legal obligation to conduct the site cleanup, which they fulfilled and in so doing, paid more than their fair share of the obligation. Plaintiffs now seek costs for this cleanup from other PRPs who also contributed to the site contamination and are also potentially liable under § 107(a) but who did not contribute their pro rata share. As stated by other circuit courts, this is the ‘quintessential’ action for contribution.”); Axel Johnson, 191 F.3d at 415, 416, 415-419 (“Every circuit that has addressed the question, including this one, has held that parties such as [the claimant] who are potentially responsible for cleanup costs under § 107 cannot bring § 107 cost recovery actions; rather, such parties ‘must seek contribution’ under § 113”; the court then held the claimant must use contribution, not cost recovery, even though it contended it was “innocent with respect to some of the contamination…”); New Jersey Turnpike, 197 F.3d at 104 (The claimant is a PRP, therefore, “its action against other PRPs is properly characterized as a section 113 action.”); Morrison Enterprises, 302 F.3d at 1133, 1135 (The claimant was a PRP, therefore, it could not pursue cost recovery and contribution, it “may only proceed with an action for contribution”); Dico, 340 F.3d at 530 (the claimant is “clearly” a PRP, therefore, any action brought by it to recoup cleanup costs “must be for contribution.”).
“[A]s courts prevented PRPs from suing under § 107(a), they expanded § 113(f) to allow PRPs to seek “contribution” even in the absence of a suit under § 106 or § 107(a).” Atlantic Research, 551 U.S. at 132 (note the sarcastic quotes around the term “contribution”); see also, Centerior Service, 153 F.3d at 352 (holding CERCLA § 113(f)(1) allows contribution claims even “in the absence of a civil action” under CERCLA §§ 106 or 107); Sun Company, 124 F.3d at 1192 (same); Akzo, 30 F.3d at 762-65 (implying a similar holding by allowing a contribution claim for costs incurred in complying with a CERCLA § 106 cleanup order); Amoco Oil, supra (court fails state any basis for the accrual of the right to seek contribution, and it does not appear that the claimant had been sued by, or had settled with, anyone for the costs it was seeking to recover).   One Court of Appeals even found that, just like cost recovery, the right to seek contribution accrued when costs were incurred. Pinal Creek, 118 F.3d at 1305-06.   Lastly, another Court of Appeals observed, “CERCLA's text indicates that contribution and cost recovery actions are… non-overlapping” remedies. United Technologies, 33 F.3d at 103.  Essentially, the Circuit Courts generally all ruled that PRPs must use contribution and that they cannot use cost recovery.
          Virtually all the distinctions between cost recovery and contribution that existed prior to SARA, which were discussed in my first blog entry to this series, were erased: (1) some decisions allowed PRPs to pursue contribution as soon as cost were incurred; prior to SARA, the incurrence of costs would have caused a cost recovery claim to accrue but not a contribution claim; (2) some decisions adopted a general rule whereby PRPs were prohibited from pursing cost recovery; prior to SARA, PRPs were allowed to pursue cost recovery; (3) some decisions had held contribution no longer required a prior cost recovery action; prior to SARA, a contribution suit accrued when a person was sued for cost recovery; (4) some decisions had held contribution no longer requires joint liability between the parties; prior to SARA, courts were in agreement that contribution required joint liability between the parties; (5) and some decisions viewed cost recovery and contribution as non-overlapping remedies; prior to SARA, it appeared the remedies could overlap and there was nothing to suggest the remedies should not overlap. 
It is this line of Circuit Court cases that lead the United States government to argue to the Supreme Court in Atlantic Research that cost recovery and contribution are not even different remedies.  “Contribution is merely a form of cost recovery, not a wholly independent type of relief.” Atlantic Research, 551 U.S. at 138 (quoting the United States’ brief).  After SARA, the Circuit Courts blurred the distinctions between cost recovery and contribution treating them as the same type of relief available to different parties.  Cost recovery was thought to be for non-PRPs and contribution was thought to be for PRPs.   
© July 2013 Brandon J. Evans