In joint tortfeasor settlements in private party actions under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), courts can choose from two competing federal contribution protection methods: the Uniform Comparative Fault Act (“UCFA”), known as pro rata, and the Uniform Contribution Among Tortfeasors Act (“UCATA”), known as pro tanto.  Last month, in City of Las Cruces and Dona Ana County v The Lofts of Alameda, LLC, Civil Action No. 2:17-cv-00809-JCH-GBW, 2024 WL 4512434, the U.S. District Court for the District of New Mexico considered the merits of both contribution protection methods and concluded that the pro rata approach was the most equitable under the circumstances. 

As background, parties who settle their liability to a federal or state government under CERCLA section 113(f)(2) are entitled to protection from contribution claims brought by other potentially responsible parties (“PRPs”).  CERCLA provides that such settlements are credited to the remaining non-settling PRPs on a pro tanto basis, meaning that if the payment is less than the settling party’s adjudicated liability, the non-settling parties remain liable for the unpaid amount.  Because of the potential for settlements unfairly penalizing non-settling parties, settlements under section 113(f)(2) must be administratively or judicially approved.  For the same reason, pro tanto settlements in other circumstances generally require that there be a good faith hearing to determine their reasonableness.

CERCLA section 113(f)(1) sets forth the basis upon which PRPs who incur costs in remediating contamination can bring contribution actions against other liable PRPs and calls for the application of equitable factors in determining relative liability.  Unlike Section 113(f)(2), Section 113(f)(1) does not specify how settlement proceeds are to be credited.  Accordingly, the pro rata approach is sometimes followed, under which the settling party’s determined share of liability is credited against the total cleanup costs.  While the pro rata model presents a risk to a plaintiff that payment may be insufficient to cover the settling defendant’s proportionate share, the plaintiff may conversely reap a windfall where the settlement amount is greater than the settling defendant’s proportionate liability.  Courts therefore remain split about the application of the two approaches for joint tortfeasor settlements in private party actions.  Currently, only the Seventh Circuit Court of Appeals mandates the pro tanto approach.  The First, Ninth, and Tenth Circuits have each stated that district courts have discretion to apply either the pro tanto or pro rata method to allocate response costs among liable parties where the settlement agreement is silent.

The instant case has a long and complicated history.  The Griggs & Walnut Ground Water Plume Superfund Site (the “Site”), located in the City of Las Cruces, was added to the National Priorities List in 2001 after initial findings of perchloroethylene (“PCE”) contamination in groundwater as early as 1993.  In 2007, a Record of Decision was entered and the City of Las Cruces and Doña Ana County (the “Plaintiffs”) began implementing the remedy.  In 2017, Plaintiffs sued the United States of America, United States Department of Defense, and the National Guard Bureau (the “United States Defendants”) as PRPs for cost recovery and contribution under CERCLA for amounts expended in connection with remediation of the Site.  Later, Plaintiffs amended their complaint twice to add additional defendant PRPs associated with various dry-cleaning operations, including American Linen Supply of New Mexico, Inc. (“American Linen”).[1] 

In 2020, Plaintiffs settled an enforcement action brought by the United States Department of Environmental Protection (“EPA”) and, at the same time, settled their affirmative claims against the United States Defendants.  Plaintiffs also settled with certain dry cleaner defendants, other than American Linen.  In 2022, the Court granted an unopposed joint motion to dismiss Plaintiffs’ claims against the settling defendants but did not hold a hearing as to whether the settlement was made in good faith, nor rule on whether it would be considered a pro tanto or pro rata settlement. 

In the decision at bar, the Court addressed several matters including the method of allocation of liability among the remaining parties.  In its opinion, the Court held that application of the pro rata approach to the prior settlements was the most equitable under the circumstances because in that way each party would pay only the percentage of contamination that it was responsible for according to the evidence in the case.  Given that the dry cleaner defendants settled with Plaintiffs for a negligible amount, or in some instances for no amount, the Court reasoned that there was a significant threat that the pro tanto method would result in American Linen being forced to pay a disproportionately greater share of response costs relative to its actual contribution.  Thus the Court held that the pro rata method would ensure that judgment against American Linen would be based on the percentage of unpaid response costs for which it was determined to be responsible.

[1] We reported here on a different decision in this case, whether American Linen was an arranger.

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