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Ninth Circuit Reverses Lower Court Decision Regarding Statute of Limitations Triggering Event for Superfund Contribution Claim

On August 10, 2020, the Ninth Circuit reversed a lower court’s grant of defendants’ motion for summary judgement, permitting plaintiffs’ case to move forward in a Superfund action for contribution. See Arconic v. APC Investment, No. 19-55181 (9th Cir. Aug. 10, 2020), a case we had reported on here. At issue was whether a settlement between plaintiffs and certain de minimis parties for future potential response costs was an adequate triggering event for the statute of limitations period (against different defendants) in an action for contribution under CERCLA Section 113(f). The Ninth Circuit held that it was not, explaining that in the context of a “judicially approved settlement,” the proper triggering event was a settlement which imposed actual cleanup costs in excess of a party’s estimated liability at the site.

The contaminated site at issue is the Omega Chemical Superfund Site located in Whittier and Santa Fe Springs, California. In 2001, a group of PRPs (the Omega Chemical Potentially Responsible Parties Organized Group, hereinafter, “OPOG”) entered into a consent decree with EPA with respect to groundwater contamination around the plant at an area which would later be described as Operable Unit 1 (“OU-1”). The entry of the consent decree triggered a three-year statute of limitations for contribution for the OU-1 costs and OPOG timely sued several parties for such contribution. See 42 U.S.C. § 9613(g)(3)(B) (“No action for contribution for any response costs or damages may be commenced more than 3 years after … the date of an … entry of a judicially approved settlement with respect to such costs or damages.”). Many of the defendants to that suit were de minimis parties (as defined by CERCLA), and those parties eventually settled with the OPOG plaintiffs for $1.7 million (the “2007 Settlement Agreement”).

That settlement resulted in OPOG assuming the de minimis parties’ responsibilities for the site. Importantly, this assumption included any claims that might be asserted against the de minimis parties in the future. As described in the Ninth Circuit’s opinion: “In essence, the [2007 Settlement Agreement] allowed these parties to walk away from the site effectively immune from further pursuit.” Arconic at 8. Work at the site was not complete, however, so EPA and OPOG entered into a separate agreement with respect to remediating a contaminated groundwater plume described as Operable Unit 2 (“OU-2”). The consent decree for OU-2 was approved by a court in 2017 (the “2017 OU-2 Consent Decree”).

This litigation began in 2014 when OPOG brought suit against several defendants (the “APC defendants”) for cost recovery for OU-2. The complaint was amended after the 2017 OU-2 Consent Decree was filed to replace the cost recovery claim with one for contribution. The APC defendants moved for summary judgement, arguing that the 2007 Settlement Agreement triggered CERCLA’s three-year statute of limitations for contribution claims. The district court agreed with the APC defendants’ argument that the 2007 Settlement Agreement was “with respect to” the same costs as alleged in this suit and granted the motion for summary judgement. For additional detail regarding the District Court’s ruling, see MGKF’s 2019 blog post.

OPOG appealed, and the Ninth Circuit reversed the district court, holding that in order for the limitations period for a contribution claim to be triggered, a judicially-approved settlement must impose actual costs on the party seeking contribution. See Arconic at 6. As noted above, CERCLA 113(g)(3) provides that “[n]o action for contribution for any response costs or damages may be commenced more than 3 years after … the date of an … entry of a judicially approved settlement with respect to such costs or damages.” The court noted that prior precedent, legislative history, and its own reading of the law meant that a “CERCLA contribution claim, in other words, is by definition predicated upon ‘an inequitable distribution of common liability among liable parties,’” and that the limitations period is not triggered until a party incurs actual costs in excess of its own liability. Arconic at 12 (citing U.S. v. Atl. Research Corp., 551 U.S. 128, 139 (2007)). The court wrote that a “settlement, then, starts the limitations period on a § 113(f)(1) claim for response costs only if it imposed those costs and serves as the basis for seeking contribution.” Id. at 13.

The court applied that reasoning to the facts at issue and held that the 2007 Settlement Agreement did not address the costs that OPOG was now seeking from the APC defendants. The court held that OPOG did not incur any actual costs with respect to OU-2 (and therefore did not have costs that could serve as the basis for a contribution claim) until it entered into the 2017 OU-2 Consent Decree. When the 2017 OU-2 Consent Decree was approved, it placed actual costs on OPOG in excess of its liabilities, and the Ninth Circuit held that that judicial approval was the appropriate triggering event for the limitations period.

The Ninth Circuit decision addressed public policy concerns in addition to past precedent and its reading of CERCLA. The court noted that because cleanups can span many years and involve many litigants, settling with “de minimis parties plays an important role in streamlining [the cleanup] process. Cashing out minor contributors can supply a needed influx of funds for cleanup work, and releasing them from future liability can reduce the number of parties involved, simplifying litigation and reducing transaction costs.” Id. at 19. The court wrote that the APC defendants’ approach would “throw a wrench” into the cleanup process because it would discourage major parties “from providing a complete release to any [other] party, however minor that party’s role in contributing to a site’s contamination. That is because any such release would require major polluters to then file all possible contribution claims concerning the site, even when the bounds of site-wide liability remain undefined.” Id.

Determining the appropriate statute of limitations triggering event under CERCLA remains a challenging, fact-specific determination, but the Ninth Circuit’s ruling in Arconic gives practitioners an important framework by which they can shape future legal arguments.