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Second Circuit Opinion Distinguishes Removal and Remediation To Find Government Claims Timely

Determining the appropriate Statute of Limitations for claims brought pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (“CERCLA”), is often a tricky matter.  Usually, the issue arises in the context of determining whether a claim is properly brought under Section 107(a), 42 U.S.C. § 9607(a), for costs voluntarily incurred, or § 113(f), 42 U.S.C. § 9613(f), for costs incurred pursuant to a court order or approved settlement, as Section 107(a) claims may be subject to a six-year statute of limitations, while claims under Section 113(f) have a three-year limitations period.  However, in State of New York v. Next Millenium Realty, LLC, No. 12-2894-cv (2nd Cir. Oct. 15, 2013), the Second Circuit turned its attention to a different distinction, the one between removal actions and remedial actions, as Section 107(a) claims “must be commenced … for a removal action, within 3 years after completion of the removal action [and] for a remedial action, within 6 years after initiation of physical on-site construction of the remedial action. . . .”  42 U.S.C. Section 9613(g)(2)(B).  In order to find the claims of the State of New York timely, the Court held that a water purification system in use for over 15 years was nevertheless a removal action and not a remedial action because, among other things, the measures were intended to “minimize and mitigate” damage from contamination and not to “permanently eliminate” it.  Id. at 24.

The case involves contamination emanating from the New Cassel Industrial Area (“NCIA”) in Nassau County, New Jersey.  In 1989, the Town of Hempstead discovered that two of its water supply wells near the NCIA were contaminated with volatile organic compounds (“VOCs”).  To address this problem, the Town installed a granulated activated carbon adsorption system (the “GAC”) to remove the VOCs from the water and, in early June, 1995, began construction of an air stripper tower to ensure the continued viability of the GAC.  Around this same time, the Town “began to suspect the NCIA was the source of the groundwater contamination.”  Id. at 13.  Tolling agreements were subsequently entered into between the State and the potentially responsible parties in late June, 2001 – six years and two weeks after construction began on the air stripper, and the State eventually brought suit in 2006 pursuant to Section 107, seeking recovery of costs incurred in investigating and responding to the well water contamination.  The defendants, all potentially responsible parties, moved for summary judgment on the ground that the installation of the GAC and the attendant construction of the air stripper constituted remedial actions for which recovery was barred as construction had begun more than six years prior to the entry of the tolling agreements.   The District Court agreed, finding that the relevant date on which the six year statute began to run was either when the GAC was installed in 1990 or, at the latest, in early June of 1995 when construction began on the air stripper.

The Second Circuit reversed the District Court’s decision.  Acknowledging that the underlying purposes of the cost recovery provisions of CERCLA are to permit governments to immediately respond to contamination and later bring suit to “hold[] polluters responsible for their actions,” id. at 17, the Court noted that CERCLA is to be liberally construed in favor of the State.  This is certainly in keeping with the case law which, in general, favors a construction of statutes of limitations that benefits the government. See, e.g., Bardaracco v. Commissioner, 464 U.S. 386, 391, 104 S. Ct. 756, 78 L.Ed.2d 549 (1984); Kelley v. E.I. DuPont de Nemours & Co., 17 F.3d 836, 843 (6th Cir. 1994).  The Court then went on to address, in general, the distinction between removal actions and remedial actions.

As the Court noted, removal actions are intended to respond to “immediate threats to public health and safety” whereas remedial actions are “generally actions designed to permanently remediate hazardous waste.”  Next Millenium Realty, LLC at 18-19.   Here, the Second Circuit found that the GAC and air stripper were designed and remained in use for at least a decade for the purpose of ensuring safe drinking water for the Town’s residents and were not intended to, and did not, remediate the source of the contamination, namely the NCIA.  Thus, the three year limitations period, running from the completion of the removal action was the proper period and, because these measures were ongoing and were not adopted as part of a permanent remedial solution until 2003, the statute had not run before the tolling agreements were entered into.   

In coming to its conclusion, the Court dismissed several arguments made by the Defendants.  First, the Court distinguished cases where the actions at issue, determined to be remedial, resulted in providing an alternate water supply and hence effectuated a permanent solution to the immediate health risk, rather than what occurred in the case before it.  Here, the Court found, even though the purification system was eventually adopted as part of a permanent solution, until that time it was a removal action because the system was intended to respond to the health threat and not address the source of the contamination.  Further, the Court held that CERCLA’s provision that removal actions “shall not” continue after more than $2,000,000 was obligated or 12 months had passed, 42 U.S.C. § 9604(c)(1), was not applicable for several reasons.  First, two express exceptions applied – the system was required to address a continuing risk to public health and its continued use was “consistent” with the remedial action.  Moreover, even the defendants acknowledged that the cited provision was not applicable to actions not funded by the federal government and that neither cost nor duration were dispositive in determining whether a particular action was removal or remedial.  Finally, the Court rejected the argument that because the State had described the purification system as “remedial,” they were bound by that designation, stating that generic use of the term “remedial” is not the equivalent of admitting that the actions were not removal.

So, the lessons to be learned from Next Millenium Realty, LLC may be several.  First, neither duration nor cost are dispositive in determining whether an action is a removal, even if the activities last for more than a decade, where the goal of the action is to mitigate an immediate health risk and the action does not address the underlying contamination.  Second, sometimes every day (and every week) counts, and sometimes it doesn’t.  And, third, the scales are almost always likely to tip in favor of a governmental entity seeking to recover costs incurred.