Opinion ID: 75792
Heading Depth: 2
Heading Rank: 2

Heading: cercla and the pay-when-paid clause

Text: 53 Blasland's other cross-appeal contention is that the district court erred in preventing it from recovering money under CERCLA on the basis of the contract's pay-when-paid clause. As we have mentioned, the contract between Blasland and the City contained what the parties referred to as a pay-when-paid clause, which stated that: [Blasland] recognizes that CITY's obligation of payment of compensation is specifically contingent upon CITY's receipt of funding from the D.E.R. for payment of such fees, costs and expenses of [Blasland]. The City was not reimbursed by DER for approximately $110,000 of the work done by Blasland. The pay-when-paid clause clearly prevented Blasland from recovering that money in a suit for breach of the contract, because it specifically and explicitly made the City's contractual liability contingent on DER reimbursement. Blasland also sought that money, however, in its CERCLA claim against the City. The district court found that the pay-when-paid clause also prevented Blasland from recovering the $110,000 under CERCLA. According to the district court, the contractual pay-when-paid clause provided the City with a valid defense from CERCLA liability to Blasland to the extent that the City did not receive funding from D.E.R. for that work. We disagree. 54 To understand our reasoning, it is necessary to understand the CERCLA liability scheme. CERCLA provides two possible avenues for a party to recover monies it spends cleaning up a polluted site. One is a suit for direct cost recovery based on section 107(a) of the statute. 42 U.S.C. § 9607. Direct cost recovery is available only to so-called innocent parties, that is, [p]arties who are not themselves liable or potentially liable for response costs under § 107(a) of CERCLA.... Redwing Carriers, Inc. v. Saraland Apartments, 94 F.3d 1489, 1513 (11th Cir.1996). In most instances, the only innocent party is the government agency that is forced to cleanup the land: the typical section 107(a) action is brought by a governmental plaintiff that has expended taxpayer dollars in cleaning up a facility. Id. It is possible that a private party may qualify as an `innocent' plaintiff enabling it to bring a cost recovery action based on Section 107(a) alone, id., but, in practice, it is rare. Kaufman and Broad-South Bay v. Unisys Corp., 868 F.Supp. 1212, 1216 (N.D.Cal.1994) (a CERCLA plaintiff, other than the government, will rarely be `innocent' and thus permitted to sue under [section 107]). But see OHM Remediation Services v. Evans Cooperage Co., 116 F.3d 1574, 1581-82 (5th Cir.1997) (allowing a private contractor to proceed as a plaintiff under section 107(a)). In this case, the district court concluded after the bench trial of the CERCLA claims that Blasland was an innocent party entitled to bring a direct cost recovery action. The City has not contested that conclusion on appeal, so we will assume for the purpose of reviewing the district court's decision that Blasland is an innocent party. See Allstate Ins. Co. v. Swann, 27 F.3d 1539, 1542 (11th Cir.1994). 55 The second avenue of recovery under CERCLA is a contribution suit under section 113 of the statute. 42 U.S.C. § 9613(f). A section 113 suit allows guilty parties responsible parties in CERCLA-decision jargon — who are liable for some of the cleanup costs, but have paid more than their fair share of those costs, to recover the amount of their excess payments from other parties who are also responsible for the pollution. See Redwing Carriers, 94 F.3d at 1513. Contribution suits are the only avenue of recovery available to a responsible party, which under CERCLA includes an owner of a facility where waste was dumped, an operator of a facility, an arranger of the disposal or treatment of hazardous waste at a facility, or an acceptor of waste for transportation or disposal. 42 U.S.C. § 9607(a). In this case, the City, as owner of the Munisport site, was a responsible party. 56 In either a section 107 direct cost recovery action or a section 113 contribution action, the elements of the plaintiff's prima facie case are the same. To establish one, the plaintiff must show: 1) that the site is a CERCLA facility; 2) that there was a release or threatened release of a hazardous substance; 3) which caused the plaintiff to incur response costs consistent with the National Contingency Plan; and 4) the defendant is a statutorily liable person, i.e., a responsible party, as described above. Redwing Carriers, 94 F.3d at 1496-97. In this case, the district court found that Blasland had proved its prima facie case, and the City does not contest that determination. The dispute is not over the requirements of the prima facie case, but instead over the availability of defenses. 57 Once a prima facie case is proven there are, according to section 107(a) of the statute, three and only three defenses to liability. Specifically, that section provides that liability is [n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section. 42 U.S.C. § 9607(a) (emphasis added). The defenses set forth in subsection (b) are that the pollution was caused entirely by either: 1) an act of God; 2) an act of war; or 3) an act of a third party unconnected to the defendant. Id. § 9607(b). It is undisputed that none of the 107(b) defenses apply to this case. 58 Section 107, read by itself, indicates that the only defenses to a CERCLA cost recovery action are the three defenses listed in section 107(b). The Sixth Circuit has said that section 107(b) set[s] forth the universe of defenses to section 107 liability. Velsicol Chem. Corp. v. Enenco, Inc., 9 F.3d 524, 530 (6th Cir.1993). Yet the exclusivity language of section 107(a) is belied by a passel of defenses explicitly provided in other sections of CERCLA. There are statutes of limitations, each applicable to a different type of cost recovery claim. 42 U.S.C. § 9613(g). See Smith Land & Imp. Corp. v. Celotex Corp., 851 F.2d 86, 89 (3d Cir.1988). And various specific sorts of substances are exempted from the coverage of the statute. See, e.g., 42 U.S.C. § 9601(14) (petroleum exclusion); 42 U.S.C. § 9607(i) (pesticide exclusion). So, too, are secured creditors who might otherwise be considered owners under CERCLA, 42 U.S.C. § 9601(20)(E)(1), and innocent landowners, 42 U.S.C. § 9601(35). And, in contribution suits, the defendant may escape liability either by virtue of an indemnification or a hold harmless agreement with the plaintiff, 42 U.S.C. § 9607(e), or by proving it has already settled its liability to the government, see 42 U.S.C. § 9613(f)(2). If, as the Sixth Circuit said, section 107(b) sets out the universe of defenses to CERCLA liability, then the statute contains alternate universes. The existence of additional enumerated CERCLA defenses elsewhere in the statute contradicts section 107(a)'s statement that section 107(b) provides the exclusive set of defenses to CERCLA. However, the pay-when-paid clause does not fall into any of these other enumerated defenses either. 13 59 Instead, the pay-when-paid clause at issue in this case is, or at least is closely akin to, an equitable defense. The City claims that because Blasland agreed that the City's contractual liability would be contingent on DER reimbursement, Blasland should not be allowed to conduct an end-run around the contract using CERCLA. This sounds like an equitable estoppel argument that runs along the following lines: Although Blasland did not release the City from CERCLA liability, it did release the City from contractual liability, and it would be unfair to allow Blasland to circumvent that release with a CERCLA suit. The City claims its pay-when-paid defense is really a legal not an equitable argument, and that not enforcing the clause would permit Blasland to retain the benefits of its contract while disregarding those burdens it now finds undesirable. Legally speaking, this is incorrect, because Blasland never assumed the burden of foregoing CERCLA recovery; the terms of the clause do not mention CERCLA liability. It is only in equity that the City's argument has a good ring to it. Thus the City's invocation of the pay-when-paid clause is, or is at least materially similar to, an equitable defense. 60 A majority of the circuits that have considered the issue have found that 107(a) bars defendants in CERCLA suits from raising equitable defenses to liability. See Town of Munster, Ind. v. Sherwin-Williams Co., 27 F.3d 1268, 1270 (7th Cir. 1994) (CERCLA does not permit equitable defenses to § 107 liability); Velsicol, 9 F.3d at 530 (holding that the doctrine of laches may not bar a CERCLA cost recovery action); Gen. Electric v. Litton Indus. Automation Systems, 920 F.2d 1415, 1418 (8th Cir.1990) (holding that CERCLA does not provide for an unclean hands defense to liability), cert. denied, 499 U.S. 937, 111 S.Ct. 1390, 113 L.Ed.2d 446 (1991); Smith Land, 851 F.2d at 90 (concluding that under CERCLA the doctrine of caveat emptor is not a defense to liability for contribution). 61 Courts denying the availability of equitable defenses to CERCLA liability have done so for two reasons. The first, of course, is the plain language of section 107(a) which explicitly limits defenses to those three enumerated in section 107(b). See, e.g., Velsicol, 9 F.3d at 530; Town of Munster, 27 F.3d at 1271. The second reason is the Congressional intent behind the statute, which was to have pollution cleaned up as quickly as possible and to see that the responsible polluters are made to pay for the cleanup. See Monarch Tile, Inc. v. City of Florence, 212 F.3d 1219, 1221 (11th Cir.2000) (CERCLA is a broad, remedial statute animated by a sweeping purpose to ensure that those responsible for contaminating American soil shoulder the costs of undoing that environmental damage.); United States v. Navistar Intern. Transp. Corp., 152 F.3d 702, 707 n. 7 (7th Cir.1998) (recognizing that one of CERCLA's purposes is prompt clean up of polluted cites) (citation omitted). Recognizing non-enumerated defenses to CERCLA liability would frustrate Congress's intent by giving responsible parties an incentive to delay cleaning up a polluted site, in the hopes of escaping liability and passing the buck(s) to someone else. For these two reasons, courts have generally rejected attempts to impress equitable defenses into the ranks of defenses to CERCLA liability. 62 We agree that CERCLA's section 107(a) bars equitable defenses. Section 107(a) imposes liability [n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this chapter. Although this statement may be contradicted by other defenses provided elsewhere in the statute, that does not mean this Court has the same power as Congress to create exceptions to section 107(a)'s bar on other defenses based on our own sense of what would be good policy. The plain language of section 107 indicates that Congress wanted defenses to suits brought by an innocent party to be narrowly circumscribed. Recognizing unenumerated equitable defenses would widen too far the circle of exemption from CERCLA liability, and invite defendants in suits brought by an innocent party (usually the EPA) to raise such defenses in the hopes of persuading the court that although the defenses were not enumerated in CERCLA, they should have been. Therefore, defenses, including equitable ones, that are not enumerated in the statute cannot thwart the imposition of CERCLA liability. 14 63 Section 107(a) bars the assertion of all equitable defenses to CERCLA liability. The pay-when-paid clause is more like an impermissible equitable defense than any of the permissible defenses enumerated in CERCLA. We therefore hold that the pay-when-paid clause in the contract between Blasland and the City was not enforceable under CERCLA to bar Blasland from recovering under that statute any money owed it by the City for which the City had not been paid by DER. 15 Thus the district court erred in deciding that the pay-when-paid clause in the contract between Blasland and the City prevented Blasland from recovering the $110,000 that it was owed by the City, but for which the City had not been repaid by DER. 64 This result may seem unfair, but, as the Eighth Circuit has said in discussing 107(a)'s exclusion of non-enumerated defenses: We realize this [provision] can and does lead to harsh results, but we are obliged to enforce the law as Congress has written it, unless, of course, such law violates some provision of the Constitution. United States v. Mexico Feed and Seed Co., 980 F.2d 478, 484 n. 5 (8th Cir.1992); see also United States v. Price, 577 F.Supp. 1103, 1114 (D.N.J.1983) (Though strict liability may impose harsh results on certain defendants, it is the most equitable solution in view of the alternative-forcing those who bear no responsibility for causing the damage ... to shoulder the full cost of the clean up.). The result may be particularly harsh in a case like this one, which is not the normal CERCLA innocent plaintiff case. Blasland was not cleaning up the site with taxpayer funds as a public service; it was doing so for profit, and it did not even do an entirely competent job. Nonetheless, the result we reach is compelled by the combination of the district court's uncontested finding that Blasland was an innocent party and CERCLA's provisions on the availability of defenses.