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Supreme Court Tries to Set a Bright Dividing Line on CERCLA Claims, but has it?

Less than a month after hearing oral arguments, the United States Supreme Court issued its unanimous decision in Guam v. United States, Docket No. 20-382 (May 24, 2021), the eagerly anticipated opinion on whether consent decrees and administrative orders that do not expressly resolve liability for claims under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) nevertheless give rise to a claim for contribution under Section 113(f)(3) of CERCLA. The issue is a crucial one and has been the subject of numerous court opinions because of the short, three-year limitations period for contribution actions. The opinion, which the Court intended to provide clarity in the area, holds that only settlements that release “CERCLA-specific liability” trigger the right to contribution.

Under Section 107(a) of CERCLA, a party who voluntarily incurs costs to remediate a contaminated site may recover its costs from owners, operators, arrangers and transporters who are responsible for the contamination.   Section 113(f)(3)(B), on the other hand, permits “[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 [to] seek contribution from any person who is not party to [the] settlement.”   In general, for any specific response action at a Site, a performing party will have a claim under either 107(a) or 113(f)(3), but not both.

There are several distinctions between Section 113(f)(3) and 107(a) claims. For example, in general, liability under Section 107(a) is joint and several, whereas under Section 113(f)(3), a party can only recover from a defendant that defendant’s share of liability. More importantly, Section 113(g)(2) of CERCLA provides that actions for cost recovery under Section 107(a) must be brought within three (3) years of the completion of a removal action, or six (6) years after initiation of construction of a remedial action, with some additional provisions to address successive response actions. Under Section 113(g)(3), contribution actions generally must be brought within a much shorter time frame, three (3) years of the date of the judgment or settlement.

Which brings us to Guam. As we reported here, the case involves a Consent Decree entered into in 2004 by and between Guam and the United States to resolve claims under the Clean Water Act with respect to leachate discharges from the Ordot Dump, which was used by the United States Navy to dispose of military wastes. However, it wasn’t until 2017 that Guam initiated an action against the Navy to recover its removal and remediation costs. The Navy moved to dismiss, arguing that the 2004 Consent Decree was a settlement which triggered Guam’s contribution claim, which was barred by the statute of limitations. The D.C. Circuit, following the overwhelming majority of Circuits, agreed. It held that Section 113(f)(3)(B) does not require resolution of CERCLA liability specifically, but, instead, that settlement agreements that arise from liability under other statutory schemes, such as the Clean Water Act, can still resolve a party's CERCLA liability and trigger a contribution claim. Because the 2004 Consent Decree required Guam to engage in activities that would be considered response actions under CERCLA, the Circuit Court held that Guam only had a 113(f)(3) contribution claim, not a 107(a) cost recovery claim, and that because the lawsuit was brought more than three years after the settlement, it was time-barred.

The D.C. Circuit was, as noted, not alone in its holding. Other courts and Circuits had held that settlements arising under the Clean Water Act, the Resource Conservation and Recovery Act, and state laws such as Pennsylvania’s Hazardous Sites Cleanup Act all gave rise to a contribution claim, and that one needed to look at the specific language of the settlements to determine whether any liability under CERCLA had been “resolved.” But the Supreme Court decided to put an end to those inquiries. Acknowledging that “[r]ather than requiring parties and courts to estimate whether a prior settlement was close enough to CERCLA, the far simpler approach is to ask whether a settlement expressly discharged a CERCLA liability,” the Court held that “[t]he most natural reading of §113(f)(3)(B) is that a party may seek contribution under CERCLA only after settling a CERCLA-specific liability.”

So, is that the end of the story? Has the Supreme Court finally provided clarity as to at least one aspect of CERCLA? While it would seem so, consider Section 128(b)(1) of CERCLA, which provides that no administrative or judicial enforcement action can be taken under CERCLA against a party who “is conducting or has completed a response action . . . in compliance with the State [cleanup] program that specifically governs response actions for the protection of public health and the environment.” So, a Clean Water Act settlement no longer gives rise to a contribution claim but can a settlement under a state’s mini-CERCLA statute? Or under a state’s voluntary clean-up program? The answer to those questions may still not be so clear.

In the meantime, if shouldn’t be a surprise if we see a new spate of cost recovery lawsuits in the next few months and years as parties reassess their older administrative and judicial settlements and find that, contrary to what they previously thought, they may still have a 107(a) claim after all.