Source: http://edgcomb-law.com/category/cercla/
Timestamp: 2019-04-24 08:02:03+00:00

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In December 2012, the Environmental Protection Agency (“EPA”) adopted a new policy setting forth the conditions on which the agency will consider providing CERCLA bona fide prospective purchaser (BFPP) protection to tenants who lease formerly or currently contaminated property. Previously, such protections were only available to purchasers of such property. Although the EPA will continue to use its enforcement discretion on a site-specific basis to the extent appropriate based on the facts regarding each property, this new policy provides tenants with guidance on how to qualify for these potential new protections.
Section 107(r)(1) of CERCLA provides statutory liability protection for certain owners or operators of property, called bona fide prospective purchasers or “BFPPs.” CERCLA § 107(r)(1) states: “Notwithstanding subsection (a)(1) of this section, a bona fide prospective purchaser whose potential liability for a release or threatened release is based solely on the purchaser’s being considered to be an owner or operator of a facility shall not be liable as long as the bona fide prospective purchaser does not impede the performance of a response action or natural resource restoration.” CERCLA § 101(40) defines a BFPP as “a person (or a tenant of a person) that acquires ownership of a facility after [January 11, 2002]” and that establishes each of the following by a preponderance of the evidence: (A) “all disposal of hazardous substances at the facility occurred prior to acquisition; (B) the person made all appropriate inquiries (‘AAI’) into the previous ownership and uses of the facility; (C) the person provides all legally required notices with respect to the discovery or release of any hazardous substances at the facility; (D) the person takes reasonable steps with respect to hazardous substances found at the facility by taking reasonable steps to stop any continuing release, prevent any future threatened release; and prevent or limit human, environmental or natural resource exposure to any previously released hazardous substances; (E) the person provides cooperation, assistance, and access to persons authorized to conduct response actions or natural resource restoration; (F) the person complies with land use restrictions and institutional controls; (G) the person complies with information requests and administrative subpoenas; and (H) the person is not potentially liable, or affiliated with any other person that is potentially liable, for response costs at the facility through any direct or indirect familial relationship or any contractual, corporate or financial relationship or the result of a reorganization of a business entity that was potentially liable.
The new EPA policy document indicates that since CERCLA § 101(40) applies to a person, or a tenant of a person, that acquires ownership of a parcel after January 11, 2002, that a tenant may derive BFPP status from an owner who satisfies the BFPP criteria. The tenant would therefore remain a BFPP as long as the owner maintained its BFPP status. However, when a tenant derives BFPP status through an owner and the owner fails to maintain its BFPP status, the tenant would also lose its BFPP status. If this occurs, EPA now indicates that it may exercise its enforcement discretion to continue to treat the tenant as a BFPP under CERCLA § 107(r)(1). This would likely happen if the tenant continues to meet the BFPP requirements set forth in CERCLA § 101(40) and § 107(r)(1), despite the owner failing to do so.
Additionally, the new EPA policy provides that to qualify for BFPP status, a tenant is not required to conduct an AAI if an appropriate AAI already was conducted by the owner. The tenant also would not be considered to be “affiliated” with the owner by EPA, despite the lease between them.
Where a tenant leases property from an owner who was never a BFPP, the EPA will again exercise its enforcement discretion on a site-specific basis to treat the tenant as a BFPP if the tenant can independently meet CERCLA’s BFPP requirements. Since CERCLA § 101(40) indicates that a person must have acquired ownership of a facility after January 11, 2002 to qualify for BFPP liability protection, tenants whose lease agreements are executed after January 11, 2002 will be eligible for BFPP under the EPA’s discretion.
EPA explains that it may not exercise its enforcement discretion under certain circumstances such as where “the lease is designed to allow the landlord or tenant to avoid its CERCLA liability or the tenant is potentially liable for reasons other than its status as a tenant and if the owner is not in compliance with state or federal regulatory requirements or administrative or judicial cleanup order or decrees relating to the leased property.“ Lastly, EPA will usually not engage in a determination of a tenant’s BFPP status until an enforcement situation exists, so it appears that EPA will not issue “comfort letters” to prospective tenants or tenants who would like confirmation that they are entitled to BFPP status.
On March 18, a New York federal district court held that a company seeking to recoup the response costs it incurred cleaning up contamination at a former chemical plant initially may maintain state law claims as well as a cost recovery claim under CERCLA § 107 MPM Silicones LLC v. Union Carbide Corp., N.D.N.Y., No. 1:11-cv-1542 (March 18, 2013). However, the court also held that it may consider a renewed motion on this issue at a later, more factually developed point in the litigation.
However, the court also held that the plaintiff may not pursue contribution or indemnification claims under federal or state law, including CERCLA Section 113(f), because it voluntarily cleaned up the contamination.
Union Carbide Corp. operated a chemical manufacturing facility on a 50 acre site near Sistersville, W.V., from 1953 through the 1970s. Union Carbide used hundreds of thousands of pounds of polychlorinated biphenyls (“PCBs”) in the manufacture of various chemical products, mainly silanes and silicones. It disposed of the PCBs and other hazardous wastes at several locations on the Sistersville site, including in unlined lagoons. No other entity deposited hazardous waste at the site.
Union Carbide discovered PCB contamination at the site in the late 1970s and early 1980s, but failed to disclose it to federal regulators. It sold the Sistersville site in 1993, and MPM Silicones LLC (“MPM”) acquired it in 2006. MPM incurred various response costs associated with Union Carbide’s release of PCBs at the site, but Union Carbide refused to reimburse MPM, which then sued Union Carbide, under both CERCLA and state law, to recover the costs it incurred and expects to incur cleaning up the site.
Union Carbide filed a 12(b)(6) motion to dismiss, arguing that MPM’s state law claims were preempted by CERCLA.
After reviewing cases from the U.S. Court of Appeals for the Second Circuit and other federal courts in New York that have addressed the preemptive effect of CERCLA on state law causes of action, the court determined that CERCLA § 107(a) does not preempt the plaintiff’s state law claims.
CERCLA § 114(b) precludes anyone who receives compensation for removal costs or damages under CERCLA from recovering compensation for the same removal costs or damages under any state or other federal law. This “double recovery bar” led the Second Circuit to hold that Section 113(f) contribution preempts state law recovery, in Bedford Affiliates v. Sills, 156 F.3d 416 (2d. Cir. 1998), and Niagara Mohawk Power Corp. v. Chevron USA Inc., 596 F.3d 112 (2d Cir. 2010).
District courts considering whether state law claims were preempted by Section 107(a) claims, on the other hand, have decided they were not. Double recovery is less of a concern when the PRP has incurred response costs voluntarily and has not incurred liability to a third party, the U.S. District Court for the Eastern District of New York held in New York v. Hickey’s Carting, 380 F. Supp. 2d 108 (E.D.N.Y. 2005) and New York v. West Side, 790 F. Supp. 2d 13 (E.D.N.Y. 2011). Union Carbide argued that Hickey’s Carting and West Side were distinguishable because MPM was a private plaintiff, not a state.
To determine whether concurrent state law claims are preempted where a private plaintiff brings an action against another party under Section 107(a), the court first considered whether allowing the state law claims to proceed would conflict with CERCLA’s settlement scheme.
Ultimately, the court found the distinction between state and private plaintiffs irrelevant, and concluded that even when the plaintiff is a private party, CERCLA § 107(a) does not preempt state law claims. The court left the door open for the defendant to make a “renewed attack at a later, more informed and factually developed point in the litigation” when it might be appropriate for the court to dismiss the plaintiff’s state law claims.
The court also dismissed the plaintiff’s claim for contribution under Section 113(f) because MPM has never been the subject of a Section 106 or 107(a) suit, and has not settled its CERCLA liability with the government. Although the plaintiff might be subject to such a suit in the future, the claim is too speculative now, the court said. Likewise, MPM may not seek contribution or indemnification under state law for claims it was not obligated to pay in the first place, the court said.
On March 15, 2013, the Ninth Circuit held in Chubb Custom Ins. Co. v. Space Systems/Loral, Inc., Case No. 11-16272, 2013 U.S. App. LEXIS 5198 (9th Cir., March 15, 2013), that the insurer Chubb Custom Insurance Company (“Chubb”) could not maintain its Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and state law subrogation claims against various potentially responsible parties (“PRPs”) because (1) the insured was not a “claimant” under CERCLA § 112(c) since it had not made a written demand to the Superfund or another PRP; (2) Chubb did not itself incur “response costs” by reimbursing the insured and therefore lacked standing to bring a CERCLA § 107(a) cost recovery action; and (3) the subrogated state law claims were time barred because the period of limitations commenced running when the insured knew or should have known of contamination on its property, not on the date Chubb made its payment to the insured.
Chubb issued Taube-Koret Campus for Jewish Life (“Taube-Koret”) a policy for Environmental Site Liability Insurance (“Policy”) for two parcels of property. After Taube-Koret acquired the properties, the California Regional Water Quality Control Board (“Water Board”) issued orders requiring Taube-Koret to investigate and remediate volatile organic compounds (“VOCs”) found on the properties. Taube-Koret complied with the orders and performed the required work. Pursuant to the Policy, Chubb paid Taube-Koret $2.4 million to make it whole for its remediation costs. The Policy contained a statement that said “If the insured has rights to recover all or part of any payment we have made under this insurance, those rights are transferred to us.” Chubb filed suit against various defendants who formerly owned or operated the properties or adjacent properties at the time alleged releases of hazardous substances occurred. Chubb’s action asserted claims under CERCLA Sections 107(a) and 112(c) and state law. The district court dismissed Chubb’s initial complaint and two amended complaints, each with leave to amend. The district court dismissed Chubb’s third amended complaint with prejudice, holding Chubb failed to allege Taube-Koret was a claimant under CERCLA § 112(c), that Chubb lacked standing under CERCLA § 107(a), and that the state law claims were time barred. Chubb appealed.
The Ninth Circuit reasoned that Section 112(c) permits an insurer to file a subrogation action for reimbursement of costs from PRPs, so long as the insurer complies with the statutory requirements. One such requirement is that the insured party must be a “claimant” as defined in the statute. Section 112(c) provides that “[a]ny person, including the Fund, who pays compensation pursuant to this chapter to any claimant for damages or costs resulting from a release of hazardous substance shall be subrogated . . .” 42 USC § 9612(c)(2). Therefore, Section 112(c) limits subrogation claims to compensation paid to any “claimant.” A “claimant” is defined as any person who presents a claim for compensation, and a “claim” is defined as a demand in writing for a sum certain. 42 USC § 9601(4)-(5). While CERCLA does not define or explain to whom this “claim” should be made, the Ninth Circuit stated that it has consistently held that the statute refers to a demand for reimbursement from either (i) the Superfund or (ii) a PRP. See, e.g., Idaho v. Howmet Turbine, 814 F.2d 1376, 1380 (9th Cir. 1987).
Because Chubb did not allege that its insured, Taube-Koret, had made a demand to defendants, the Superfund, or any PRP, it could not maintain its CERCLA § 112(c) cause of action. The Ninth Circuit rejected the argument that a claim to an insurer qualifies the insured as a claimant, stating “[t]here is no indication that section 112(c)(2) contemplates this meaning of claimant,” as Congress did not use the broader term “person” but instead used the term “claimant.” Chubb v. Space Systems/Loral, at *22-23.
The Ninth Circuit noted that the issue of whether CERCLA § 107(a) authorizes a subrogated cost recovery action was a matter of first impression, noting a lack of controlling or persuasive authority on the issue. The Court engaged in a lengthy discussion that included an analysis of the text of Section 107(a), the statute as a whole, legislative history, and public policy. The Ninth Circuit concludes that “an insurer that is only obligated to reimburse the insured for cleanup costs does not itself incur response costs,” and therefore it cannot bring a Section 107(a) cost recovery action. In reaching this conclusion, the Court stated that Chubb could not bring a Section 107(a) action because it had no statutory liability: “Chubb lacks standing to sue under section 107(a) because it has not itself become statutorily liable for response costs under CERCLA.” Chubb v. Space Systems/Loral, at *30. The Ninth Circuit also held that permitting insurers to bring Section 107(a) actions would render Section 112(c) a nullity, which would violate rules of statutory interpretation, and that public policy favored disallowing subrogation claims to be brought pursuant to CERCLA § 107(a).
The Ninth Circuit also affirmed the district court’s dismissal of Chubb’s subrogated state law claims (Cal. Health & Safety Code, negligence per se, and strict liability) as time-barred under California Code of Civil Procedure (“CCP”) § 338(b). Under California law, the three-year period of limitation under CCP § 338 commences to run when a plaintiff knows, or reasonably should have known, of the wrongful conduct at issue.
Chubb challenged the district court’s dismissal by arguing that the statute of limitations did not commence until Chubb’s payment of the claim. But the Ninth Circuit found that the cases cited by Chubb apply only to third-party subrogation actions, where an insurer asserts an equitable indemnity claim arising from a payment by an insurer to a third party on behalf of the insured. Chubb’s claims were based on first-party losses by the insured – – Chubb reimbursed Taube-Koret directly for its costs of cleaning up contamination, and did not make a settlement payment to a third party.
Since Chubb asserted the claims of Taube-Koret in subrogation, the Ninth Circuit agreed with the district court and held that the statute of limitations period began to run when Taube-Koret knew, or should have known, of the release of hazardous substances on its properties.
The Ninth Circuit has made clear that CERCLA permits subrogation under Section 112(c) only when insurance payments are made to a “claimant” (i.e., parties who have submitted demands to the Superfund or other PRPs). The court also made clear that Chubb lacked standing to bring a CERCLA § 107(a) claim because it was not itself a PRP. Finally, the Court has made clear that in property contamination cases, insurers seeking subrogation under state law will be held to the same statute of limitations commencement trigger as is applicable to the insured.
In Stratford Holding, LLC v. Fog Cap Retail Investors, et al., Stratford Holding LLC (“Stratford”) sued its lessees, Fog Cap Retail Investors LLC (“Fog Cap”) and Foot Locker Retail Inc. (“Foot Locker”), under CERCLA §§ 107 and 113, seeking cost recovery for costs incurred in assessing alleged PCE contamination in the soil and groundwater of its property. Allegations of PCE contamination arose when Stratford, upon conducting a visual inspection, discovered poor housekeeping practices at a commercial dry cleaning business on the property. Since the commercial dry cleaning business subleased the property from Fog Cap and Foot Locker, Stratford made demand upon them as its direct lessees to investigate the potential contamination further. Fog Cap commissioned an environmental investigation in response, finding no PCE contamination. However, Stratford thereafter conducted another assessment that revealed PCE concentrations of 1200 ppb in the soil and 56 ppb in the groundwater. When Fog Cap and Foot Locker declined to reimburse Stratford for the costs of the assessment and refused to agree to restore the premises to its pre-lease condition, Stratford filed suit in federal court for cost recovery under CERCLA §§ 107 and 113, among other claims. Fog Cap and Foot Locker moved to dismiss the CERCLA claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim under which relief can be granted.
In order to establish a prima facie case for cost recovery under CERCLA, a plaintiff must show that: (1) the site is a CERCLA “facility”; (2) there was a release or threatened release of a hazardous substance; (3) the plaintiff incurred response costs consistent with the National Contingency Plan (NCP); and (4) the defendant is a potentially responsible party. The only point of contention in the motion to dismiss was whether the costs incurred by Stratford were “necessary” and incurred in a manner consistent with the NCP under CERCLA §107(a)(4)(B). According to well-established CERCLA jurisprudence, there must be an actual and real threat to human health or the environment in order for response costs to be “necessary.” Using a rationale that is somewhat novel in CERCLA litigation, the court agreed with Fog Cap and Foot Locker that the response costs were not “necessary” and dismissed Stratford’s claim.
First, the court reasoned that the determination by the state environmental agency, the Georgia Environmental Protection Division (GEPD), not to list the site on its Hazardous Site Inventory was a major indicator that Stratford’s investigation response costs were unnecessary. GEPD issued its decision not to list the site in a Release Notification, noting that it had conducted its own assessment and found no release exceeding a reportable quantity. GEPD neither compelled further investigation or remediation of the site nor issued a statement that no further investigation or remediation was required. Nevertheless, given that the agency is required to list a site on the Hazardous Site Inventory if the contamination poses a threat to human health or the environment, the court concluded that GEPD’s decision not to list the site was the equivalent of a government determination that the PCE contamination posed no threat to human health or the environment. Further, the court considered that Stratford proffered no additional facts to show that its response was necessary to prevent a real threat to human health or the environment.
CERCLA caselaw clearly establishes that agency enforcement action is not a prerequisite to private party cost recovery. Therefore, the absence of such agency action is not conclusive on the issue of whether any response costs incurred were “necessary.” Here, however, the court was faced with a slightly different scenario – an agency, presented with some evidence of contamination, chose not to take any action to compel remediation. The court cited its own decision, Southfund Partners III v. Sears, Roebuck & Co., 57 F.Supp.2d 1369 (N.D. Ga. 1999), in support of its conclusion. In Southfund, a plaintiff similarly sought recovery of response costs for remedial efforts to remove contamination following a determination by the George Department of Natural Resources that the contaminant release was under the reportable quantity. The court granted the defendant summary judgment in that matter, reasoning that upon considering that the state agency did not require remedial efforts to be undertaken, “no reasonable juror could find the response costs to be necessary.” Southfund, 57 F.Suppp.2d at 1378.
The federal district court for the Northern District of Georgia clearly follows the rationale that where an investigation reveals contamination, but a government agency determines the release to be under the reportable quantity and declines to require remediation, the recovery of response costs will not be allowed – except, perhaps, if the plaintiff offers convincing additional evidence showing that its response was necessary to prevent a real threat to human health or the environment. However, not all courts are willing to dismiss a CERCLA claim under such facts. The Ninth Circuit Court of Appeals has specifically reserved rendering an opinion on whether “response costs not required by state and local agencies may  be necessary.” NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). The federal district court for the Northern District of California denied summary judgment on the issue of the necessity of response costs in connection with perchlorate levels in water supply wells that were below drinking water criteria. While the facts did not indicate the details of government agency determinations in connection with the response, the court was unwilling to grant summary judgment on the basis of contamination below applicable regulatory criteria, stating that “whether or not perchlorate contamination in the subbasin posed a threat to human health appears to be a dispute of material fact, and this issue is not resolvable on summary judgment.” Santa Clara Valley Water Dist. v. Olin Corp., 655 F. Supp. 2d 1066, 1072 (N.D. Cal. 2009).
Lastly, the Stratford Holdings court considered Stratford’s argument that because the NCP requires a Remedial Investigation and Feasibility Study (RI/FS) before determining whether a site is a threat to human health or the environment, it was still in the process of proving a threat to human health and the environment, and thus the claim should not be dismissed. The court opined that even if an RI/FS later revealed a threat, Stratford’s claim for cost recovery at this point in time was premature. In making this statement, the court may have been signaling that should Stratford complete its RI/FS and find a demonstrable threat to human health and or the environment, it could refile its claim for investigation costs at that time.
Based on these grounds, the court dismissed Stratford’s federal claims. After declining to exercise supplemental jurisdiction over Stratford’s remaining state law claims, the court terminated the action.
The United States District Court for the Eastern District of California denied defendants’ motion to dismiss in Chevron’s CERCLA § 107 cost recovery action against them in connection with the EPC Eastside Disposal Facility site outside of Bakersfield, CA. In June 2005, Chevron, as one of several parties deemed responsible by the California Department of Toxic Substances Control (“DTSC”) for the presence of hazardous substances at the site, entered into a Consent Order with DTSC, under which it agreed to spearhead the cleanup activities at the site. Chevron has settled with hundreds of companies and individuals in return for contribution to the substantial cleanup costs associated with the site’s remediation. However, several “smaller responsible parties,” as they characterize themselves in the motion, have declined to settle with Chevron, and, as a result, Chevron filed suit, seeking to hold them jointly and severally liable for all response costs under CERCLA § 107.
A CERCLA § 107 cost recovery action is reserved for potentially responsible parties (PRPs) that voluntarily incur response costs and allows the plaintiff PRP to hold a defendant PRP jointly and severally liable for all response costs, unless the defendant can show there is a reasonable basis for apportionment. In contrast, a CERCLA § 113 contribution action is appropriate where a PRP has been sued under CERCLA §§ 106 or 107, or enters into a settlement to resolve its CERCLA liability to the United States or a state. A CERCLA § 113 contribution action enables the plaintiff PRP to hold other defendant PRPs liable only for their equitable share of response costs. In this case, the “smaller responsible parties” argued in their motion to dismiss that Chevron was not entitled to bring its § 107 cost recovery claim against them because Chevron did not voluntarily incur response costs, based on its status as a party to the Consent Order with DTSC. Instead, they argued, Chevron was limited to a CERCLA § 113 contribution action.
The court found that since Chevron has not been sued under CERCLA §§ 106 or 107 and has not entered into a “settlement” to resolve its CERCLA liability, a § 113 contribution claim was inappropriate. Further, the court found that the Consent Order the Chevron entered into with DTSC is neither “a satisfaction or release from liability” nor a mechanism barring Chevron from acting voluntarily in the response. Accordingly, Chevron was entitled to bring a § 107 cost recovery action against the defendants. The court also rejected defendants’ allegation that Chevron’s assertion of the § 107 cost recovery claim was overreaching in that it threatened the defendants with joint and several liability due to their inability to reach a settlement agreement. The court pointed out that CERCLA provides protection against inequitable results, because where PRPs, such as the defendants, are sued in a § 107 cost recovery action and held jointly and severally liable, those PRPs are entitled to seek contribution from the plaintiff and others under § 113 to attempt to recover their excess costs.
On June 6, 2012, U.S. District Judge William Alsup granted summary judgment to ELG client CNA Holdings, LLC (“CNA”) in a CERCLA § 113(f) contribution suit brought against it by Asarco LLC. COURT ORDER Asarco filed the suit in 2011 against CNA, and several other defendants, to recoup a substantial portion of $33 million in anticipated cleanup costs it paid to DTSC in settlement of a bankruptcy claim filed by DTSC regarding a Superfund site in northern California known as the Selby Slag Site. The Selby Slag Site was formerly the location of a smelter operated by ASARCO on the shore of San Francisco Bay for over 50 years. In 1989, ASARCO had entered into a prior settlement regarding the allocation of past and future Selby Slag Site response costs with the State Lands Commission and Wickland Oil Company.

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