Opinion ID: 597450
Heading Depth: 3
Heading Rank: 1

Heading: Validity of Release Under CERCLA

Text: 17 We first take up the ruling of the district court that parties responsible for environmental cleanups under CERCLA may not contractually transfer or allocate CERCLA liability among themselves. The district court's ruling has been the subject of comment and analysis by numerous authors 4 and has been followed by at least one other district court in our circuit. See CPC Int'l, Inc. v. Aerojet-General Corp., 764 F.Supp. 479 (W.D.Mich.1991). 18 The district court examined section 107(e)(1) of the Act, 5 and pronounced the language quoted in the margin internally inconsistent. It concluded that the first sentence forbids giving effect to releases between tortfeasors in CERCLA contribution suits, and that the only effect of the second sentence is to permit any person to contract with others not already liable under the act to provide additional liability by way of insurance or indemnity. 743 F.Supp. at 529-30. According to the district court, then, defendants' reliance on the release given by AMI is misplaced. Id. at 530. 19 However, in a recent opinion released by another panel of this court, the district court's reading of the statute was rejected. In Niecko v. Emro Marketing Co., 973 F.2d 1296 (6th Cir.1992), that panel, in construing a Michigan statute utilizing language essentially identical to the portion of CERCLA under consideration, did not read the two sentences as being inconsistent: 20 [T]he better interpretation ... is that the first sentence provides that all parties involved are to be jointly and severally liable to the claimant under the statute. Where the claimant is the government, liability may not be transferred. However, as between the parties allegedly responsible ... liability may indeed be transferred. In other words, the first sentence ensures the clean up is performed and those responsible cannot escape their liability for cleaning the property. However, in terms of financial liability, the parties may allocate the costs of the clean up between them. Such an interpretation is consistent with the legislative history of CERCLA, See 126 Cong.Rec. 30,984 (1980). This is a more palatable and consistent interpretation ... because it allows the two sentences to be read as internally consistent. The Ninth Circuit came to a similar holding in Mardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1460 (9th Cir.1986). We, therefor [sic], join with the Ninth Circuit in its interpretation of these clauses under CERCLA.... 21 Niecko, 973 F.2d at 1300-01 (emphasis in original). 22 That reading of the two sentences of the statutory language seems to us to make sense both in logic and as a matter of public policy. The underlying purpose of the statutory language under scrutiny is to ensure that responsible parties will pay for the cleanup and that they may not avoid liability to the government by transferring this liability to another. However, this purpose is not inconsistent with parties responsible for the cleanup transferring or allocating among themselves the cost associated with this liability, so long as they remain liable to the third party who can demand the cleanup. This is what is permitted by the second sentence--the shifting or allocation of the risk of the cost of liability between potentially responsible persons, without diluting CERCLA liability for the cleanup itself. Such allocations may then be relied upon to govern the outcome of a later suit for contribution by the responsible party who actually was held responsible for the cleanup. As one commentator has noted: 23 Section 107(e)(1) prohibits attempts to undermine CERCLA by transferring the liability owed to the CERCLA claimant. By the first sentence of the section, responsible parties are held accountable for their actions and prohibited from escaping CERCLA liability. However, the second sentence provides an exemption which narrows the scope of the first sentence. This sentence exempts agreements to allocate the costs of liability between private responsible parties. These private risk allocations are permitted because they are consistent with the intent of the first sentence to prevent responsible parties from escaping CERCLA liability.... 24 .... 25 ... [P]rivate risk allocations substantially assist in facilitating real estate transactions. Risk shifting provides a mechanism for the parties to minimize exposure to the risk of third-party CERCLA claims. While also protecting against third-party claims, risk shielding primarily represents a means to protect against the risk of claims by the other party to the transaction. These techniques provide flexibility in the negotiating process and facilitate the parties' ability to close real estate transactions successfully. Because of these benefits, private risk allocations may further CERCLA's ultimate goal of cleaning up pollution caused by hazardous substances. 26 Thaddeus Bereday, Note, Contractual Transfers of Liability under CERCLA Section 107(e)(1): For Enforcement of Private Risk Allocations in Real Property Transactions, 43 Case W.Res.L.Rev. 161, 204, 212 (1992) (citations omitted). 27 In view of the previous holding of this court in Niecko, the ruling of the district court that a release could not be effective to bar AMI's CERCLA cause of action for contribution, must be reversed.