In a 7-2 opinion issued today, the United States Supreme Court held that CERCLA does not preempt state law statutes of repose that foreclose causes of action for personal injury and property damage claims asserted after a statutorily-prescribed time period has elapsed, effectively absolving potential defendants from liability.

The case – CTS Corp. v. Waldburger et al, 573 U.S. ___ (2014) (slip op) – involves a 2011 state-law nuisance action against the former property owner, CTS Corp., which in 1987 sold property contaminated with TCE and DCE, which it had characterized as “environmentally sound.”  More than 20 years after CTS Corp. sold the property, EPA informed subsequent property owners and adjacent landowners that their groundwater was contaminated and that the source of the contamination was the former electronics manufacturing facility operated by CTS Corp. on the property.

CTS Corp. defended the nuisance claims on the basis that North Carolina’s statute of repose – which prevents a tort suit from being brought more than 10 years after the defendant’s “last act or omission . . . giving rise to the cause of action” – barred the plaintiffs’ claims since CTS Corp.’s last act or omission that gave rise to the contamination occurred, at the latest, in 1987, when CTS Corp. sold the property.

The District Court agreed with CTS Corp.’s position and dismissed the suit on this basis, but the Fourth Circuit reversed, ruling that Section 9658 of CERCLA – which preempts state law statutes of limitations for any action brought for personal injury or property damages that are caused or contributed to by exposure to a hazardous substance, pollutant or contaminant released into the environment from a facility – also preempted North Carolina’s 10-year statute of repose.  The Fourth Circuit found Section 9658 of CERCLA to be ambiguous, and that an interpretation favoring preemption of North Carolina’s statute of repose and allowing plaintiffs’ claims to proceed would serve CERCLA’s broad remedial purposes.

The Supreme Court disagreed with the Fourth Circuit.  In reversing, Justice Kennedy, writing for the majority, noted that there is a clear distinction in the law between a statute of limitations, which creates a time limit for suing in a civil case based on when a claim accrued, and a statute of repose, which “puts the outer limit on the right to bring a civil action . . . measured not from the date on which the claim accrues, but instead from the date of the last culpable act or omission of the defendant.”  Thus, statutes of repose are intended to provide the defendant with a “fresh start” and freedom from any potential liabilities associated with past conduct.

Justice Kennedy also pointed to an important difference between a statute of limitations and statute of repose – statutes of limitation can be tolled by the so-called equitable “discovery rule,” whereas statutes of repose cannot.  In 1986, when Congress amended CERCLA to adopt Section 9658(a)’s preemption provision, Congress also codified the discovery rule at Section 9658(a)(4), which provides that a cause of action for personal injury or property damage caused by an environmental condition does not accrue until the plaintiff either knew, or reasonably should have known, that the injury was caused or contributed to by a hazardous substance, pollutant, or contaminant.

On a state level, both Pennsylvania and New Jersey have adopted statutes of repose for damages associated with the design, planning, supervision, surveying or construction of an improvement to real property.  Pennsylvania bars claims brought more than 12 years after, and New Jersey bars any claim brought 10 years after completion of the improvement.  See 42 Pa.C.S. §5536 and N.J.S.A. § 2A:14-1.1.

The interplay between a statute of repose and a statute of limitations was also an issue discussed at length by the New Jersey Appellate Division in the Morristown Associates case that we reported on last summer, which concluded that prior Appellate Division precedent holding that New Jersey’s 10-year statute of repose did not apply to Spill Act claims for environmental contamination and did not prohibit the court from adopting a 6-year statute of limitations for private-party contribution claims under the Spill Act.  That issue is currently pending before the New Jersey Supreme Court.

It is important to note that nothing in the Court’s CTS Corp. opinion affects CERCLA’s primary liability provisions.  The opinion relates only to the application of state statutes of repose as applied to state tort claims.

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