Source: https://www.loeb.com/en/insights/publications/2004/12/certainty-and-uncertainty-in-the-post-cooper-v-a__
Timestamp: 2019-04-26 04:09:24+00:00

Document:
Today, the United States Supreme Court issued an important decision which radically alters the conventional understanding of how CERCLA applies to private cost recovery actions. In Cooper Industries, Inc. v. Aviall Services, Inc., Case No. 02-1192, 543 U.S. ____ (2004), (“Cooper v. Aviall”) the Supreme Court held that a private party is not permitted to bring a cost recovery action under § 113(f)(1) of CERLCA, 42 U.S.C. § 9613(f)(1)2 unless the United States (“EPA”) or a state has taken action against it under sections 106 (42 U.S.C. § 9606) or 107 (42 U.S.C. § 9607) of CERCLA or has entered into an administrative settlement with the United States. At the same time, the Supreme Court left two very significant questions, (1) whether a private party which voluntarily complies with a § 106 order can seek contribution under § 113(f)(1) and (2) whether a private party which voluntarily incurs costs can recover under § 107(a)(1), unanswered. The decision will have a profound impact on how future environmental cost-recovery actions are handled.
(3) The private party enters into an administrative settlement with EPA or the state.
More significantly, while the holding initially appears to be the death knell for private CERCLA actions in the absence of EPA or state involvement, the Supreme Court specifically declined to rule on the question of whether a private party can bring a § 107 action to recover costs in the absence of a § 106 or § 107 civil action brought by EPA or a state. Section 107 provides that a PRP (current owner or operator, owner or operator at time of disposal, generator or transporter) “shall be liable for . . . any other necessary costs of response incurred by any other person consistent with the national contingency plan.” In Key Tronic Corp. v. United States, 511 U.S. 809 (1994), the Supreme Court stated that “§ 107 unquestionably provides a cause of action for private parties to seek recovery of cleanup costs” and that by imposing such liability upon PRPs, it “impliedly” authorizes a party to bring a cost recovery claim under section 107. Justice Scalia, in a concurring opinion in Key Tronic, held that “Section 107(a)(4)B) states that persons are liable for certain costs ‘incurred by any other person’ (emphasis added), thus providing an express cause of action for private parties.” Key Tronic at 822.
Thus, although a private party may not have a right to bring a cost recovery action under section 113(f)(1), a private party may have a right to bring such an action under Section 107.9 How this issue is ultimately resolved will have a profound impact on CERLCA litigation.
In light of the foregoing, private parties must carefully consider how they proceed with investigations, clean ups and cost recovery proceedings, particularly in cases in which EPA or the State are not directly involved.
Although private parties may no longer bring CERCLA § 113 claims in the absence of § 106 and § 107 civil actions or administrative settlements, there are a variety of other claims that can be brought.
f. A private party should consider, where appropriate, bringing claims for breach of contract such as breach of a purchase and sales agreement or breach of a lease.
a. Where a party is involved in a site in which EPA or a State is involved, it should carefully consider whether to voluntarily incur response costs without either a suit having been filed under § 106 or § 107 or without having entered into an administrative settlement.13 If it does voluntarily incur costs, it will not have a right to recover those costs under § 113 (at least until a § 106 or § 107 “civil” action is filed).14 While it may have a right to recover costs under § 107(a), this issue has not been decided.
c. Parties that are involved in RCRA sites are also at significant risk. Thus, for example, a site owner or operator which engages in a voluntary RCRA closure would not have a right to seek contribution from prior owners, operators, generators or other PRPs under § 113.16 Similarly, a party which is sued under RCRA or receives an administrative order under RCRA, would not have a right to contribution under § 113. Therefore, parties involved in RCRA sites should consider seeking to resolve their obligations under CERCLA in order to create a right of contribution under § 113.
d. Where a party is involved in a site in which neither EPA nor a State are taking action under CERCLA, the party should consider whether or not to encourage them to take such action in order to create a right to file a § 113 claim. EPA will likely be reluctant to take on any additional sites, particularly if the site is not listed as a Federal Superfund site. Moreover, while having them take such action could provide the party with a right of action under § 113, it could also elevate the level of scrutiny that the site will receive, thereby increasing response costs and the time and effort it will take to close the site.
In sum, the Cooper v. Aviall decision has dramatically changed the way parties must approach hazardous substance investigations and cleanups. A party which voluntarily incurs response costs in the absence of a “civil action” under § 106 or § 107 or an administrative settlement may not bring a contribution action under § 113(f)(1). The questions of whether such a party has a right to cost recovery under § 107, however, remains open. All PRPs must carefully analyze how the case affects their rights when evaluating investigation and cleanup strategies.
1. Albert M. Cohen is an environmental partner at Loeb & Loeb LLP in Los Angeles. He has practiced in the Superfund area for over twenty years and filed an amicus brief in the Cooper v. Aviall case on behalf of various amici including Federal Mogul Corp., Crane Co., LFR, Inc., The Source Group, and Geomatrix Consultants, Inc.
3 See e.g. Bedford Affiliates v. Sills, 156 F. 3d 416, 425 (2d Cir. 1998); Pinal Creek Grp. v. Newmont Mining Corp. 118 F. 3d 1298, 1301 (9th Cir. 1997); Axel Johnson, Inc. v. Carroll Carolina Oil Co., 191 F. 3d 409, 415 (4th Cir. 1999). There were various rationale for why a party was entitled to bring a section 113 claim for contribution. Some noted that § 113 did not create any new liability, but merely confirmed “the right of a [PRP] under section 107 to obtain contribution from other [PRPs]. New Castle County v. Halliburton NUS Corp., 111 F. 3d 116, 1122 (3rd Cir. 1997); See also United Tech Corp. v. Browning-Ferris Indus., Inc., 33 F. 3d 96, 102, n. 10 (1st Cir. 1994).
6 Note that the action must be taken pursuant to either section 106 or 107. Thus, if a state agency takes action to require cleanup under a state law, such as the California Water Code, the party would not have a right to seek cost recovery under § 113(f)(1).
7 It does appear clear, however, that a private party which complies with an order issued under the Resource Conservation Recovery Act (“RCRA”) or voluntarily undertakes a RCRA cleanup, does have a right to contribution under § 113 unless EPA or a State initiate a civil action under § 106 or § 107 of CERCLA or enter into an administrative settlement.
9 Most courts which had addressed this issue had held that only “innocent” parties could bring cost recovery actions under § 107 and that responsible parties were limited to § 113 actions. See fn. 2, supra. However, they did so with the understanding that responsible parties could bring contribution actions under § 113. How they would resolve this issue in light of the Supreme Court’s ruling in Cooper is now open.
10 In Cooper, the Court noted that one issue that it was not prepared to address was whether Aviall had waived its § 107 claim.
11 This provision only allows injunctive relief but not cost recovery. See Meghrig v. KFC Western, Inc., 516 U.S. 479 (1996). Therefore, it would be most appropriate to bring a RCRA claim where a party is likely to incur additional costs in the future. In addition, if a party prefers to be in Federal court, filing a RCRA claim might be a way to obtain supplemental jurisdiction over the non-Federal claims. Still, the court may bifurcate any state court claims that are also filed.
13 Note that while the site need not be a Superfund site in order for EPA to be involved, EPA is much more likely to be involved if it is a Superfund site.
14 Where a party enters into an administrative settlement, it is not clear whether the party is only entitled to relief with regard to the matters that were settled, or may seek declaratory relief with regard to future costs. Section 113(f)(3)(B) states that “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 may seek contribution from any person who is not a party to a settlement referred to in paragraph (2).” This could be read to permit actions as long as it has resolved liability for “some or all” of a response actions or costs. However, § 113(g)(2), which addresses § 107 actions provides that “In any such action described in this subsection, the court shall enter a declaratory judgment on liability for response costs or damages that will be binding on any subsequent action . . .” Since there is a provision which specifically allows declaratory relief for § 107 actions, but not § 113 actions, courts may hold that there is no right to declaratory relief under § 113.
15 It is not clear how EPA will approach this problem. EPA could be cooperative and enter into such agreements. On the other hand, it may see the lack of a right to contribution as a means to put additional pressure on parties which refuse to settle.
16 Such a party would have the non-§ 113 rights discussed above.

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