Opinion ID: 779057
Heading Depth: 4
Heading Rank: 2

Heading: MERLO's Liability Scheme

Text: 65 The Insurers next allege that the provisions of MERLO providing for recovery of cleanup costs from PRPs conflict with and are therefore preempted by CERCLA and HSAA. MERLO allows the City, once it has incurred cleanup costs, to impose joint and several liability on PRPs for the entire amount of its costs. See MERLO § 8.24.040. At the same time, MERLO fails to provide a mechanism whereby PRPs may impose on the City its fair share of costs incurred (whatever that fair share might be). Under the facts of this case, we agree that portions of this liability scheme are preempted if the district court finds that Lodi is a PRP. 66 Section 107 of CERCLA permits the government or a private party who has incurred response costs to bring suit against a PRP to recover those costs. See 42 U.S.C. § 9607. Applying federal common law principles, we have interpreted Section 107 as imposing joint and several liability on PRPs whenever the harm caused to a site is indivisible. Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358, 362 (9th Cir. 1998). Importantly, because liability is joint and several, a defendant PRP in a cost-recovery action under Section 107 may be held fully liable for the entire clean-up costs at a site, despite the fact that the defendant PRP was in fact responsible for only a fraction of the contamination. 67 Moreover, as originally enacted, CERCLA did not provide PRPs with an express cause of action for contribution. See Centerior Serv. Co. v. Acme Scrap Iron & Metal Corp., 153 F.3d 344, 348 (6th Cir. 1998). Without a claim for contribution, any individual PRP could be singled out as a defendant in a Section 107 cost-recovery action and required to reimburse the Section 107 plaintiff for response costs far in excess of the defendant PRP's pro rata share. Because such a result appeared inequitable, many courts recognized an implicit right to contribution under Section 107, where a PRP was subject to joint and several liability and incurred response costs in excess of its fair share. See, e.g., Mardan Corp. v. C.G.C. Music Ltd., 804 F.2d 1454, 1457 & n. 3 (9th Cir.1986). 68 In 1986, Congress amended CERCLA by passing the Superfund Amendments and Reauthorization Act of 1986 (SARA), 42 U.S.C. §§ 9601-9675. Among other additions, SARA added CERCLA § 113(f), which explicitly recognizes a claim for contribution. Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1300 (9th Cir.1997). A PRP's contribution liability [under CERCLA § 113(f)] correspond[s] to that party's equitable share of the total liability.... Id. at 1301. Thus, CERCLA § 107 and CERCLA § 113 provide different remedies: a defendant in a § 107 cost-recovery action may be jointly and severally liable for the total response cost incurred to cleanup a site, whereas a defendant in a § 113(f) contribution action is liable only for his or her pro rata share of the total response costs incurred to cleanup a site. 69 Like CERCLA, HSAA explicitly authorizes any PRP that has incurred response costs to seek contribution from any other PRP. Cal. H & S Code § 25363(e). However, unlike liability under CERCLA, liability under HSAA is not truly joint and several. Any person found liable for costs under [] HSAA who establishes by a preponderance of the evidence that only a portion of those costs or expenditures are attributable to that person's actions will be required to pay only for that portion. Bancroft-Whitney, California Civil Practice, Environmental Litigation, § 3:85 (1993); see also Cal. H & S Code § 25363(a). Liability under HSAA is therefore apportioned according to fault. 70 The Insurers first argue that MERLO conflicts with CERCLA and HSAA because CERCLA and HSAA allow any PRP that has incurred response costs to seek contribution from any other PRP, whereas under MERLO, Lodi cannot be sued for contribution. 71 This conflict preemption argument is rooted in the Insurers' assumption that Lodi is a PRP. To date, however, Lodi has not been administratively adjudged a PRP by either the federal EPA or California's DTSC. Nor has a court adjudged Lodi a PRP. While we decline to decide whether Lodi is a PRP on the record before us, we note that it is doubtful whether Lodi may be considered a PRP merely as a result of operating its municipal sewer system. See Lincoln Prop., Ltd. v. Higgins, 823 F.Supp. 1528, 1539-44 (E.D.Cal.1992) (holding that a municipal operator of a sewer system that leaked hazardous waste could rely on a third-party defense to avoid liability under CERCLA). But see Westfarm Assocs. v. Wash. Suburban Sanitary Comm'n, 66 F.3d 669, 675-80 (4th Cir.1995) (holding that a municipal operator of a sewer system is liable for the acts of a third party that discharges hazardous waste into the system). See also Robert M. Frye, Municipal Sewer Authority Liability Under CERCLA: Should Taxpayers Be Liable For Superfund Cleanup Costs?, 14 Stan. Envtl. L.J. 61 (1995) (criticizing the Westfarm decision and arguing that municipalities should not bear CERCLA liability for operating sewer systems because some leakage from sewers is unavoidable and the parties dumping chemicals into the sewer, not the operator of the sewer, is the responsible party). We remand to the district court the question of whether Lodi is a PRP. 72 If the district court finds that Lodi is a PRP, MERLO is preempted to the extent that it protects Lodi from contribution claims by other PRP's. 15 CERCLA permits a PRP who incurs response costs to bring suit to recover those costs from any other PRP. Thus, in theory, Fireman's Fund's or Unigard's insured could remediate the Lodi site and then sue the City pursuant to CERCLA § 113(f) or HSAA § 25356(e) for contribution in the amount of Lodi's fair share of the costs. If Lodi is indeed a PRP, it cannot simply legislate away this potential contribution liability under state and federal law. For these reasons, we find that MERLO is preempted to the extent that it legislatively insulates Lodi from contribution liability under state and federal law. 16 73 Next, the Insurers allege that MERLO conflicts with CERCLA because under MERLO § 8.24.040, Lodi may impose joint and several liability for the entire clean-up cost onto any one PRP, whereas CERCLA does not permit a PRP such as Lodi to impose joint and several liability on other PRPs. 74 Our circuit has held that a PRP may not bring a CERCLA § 107 cost recovery action, and instead may bring only a claim for contribution under CERCLA § 113(f). Pinal Creek, 118 F.3d at 1301. This means that a PRP does not have a claim for the recovery of the totality of its cleanup costs against other PRPs, and a PRP cannot assert a claim against other PRPs for joint and several liability. Id. at 1306. In support of our decision in Pinal Creek, we noted that allowing a party responsible for part of the contamination to impose joint and several liability on other PRPs would result in unfair cost shifting and guarantee[] inefficiency, potential duplication, and prolongation of the litigation process in a CERCLA case. Id. at 1303 (quoting T H Agric. & Nutrition Co. v. Aceto Chem. Co., 884 F.Supp. 357, 361 (E.D.Cal.1995)). We have not recognized any exception to Pinal Creek for municipal PRPs and we decline to do so now. 75 Thus, if the district court determines that Lodi is a PRP, Lodi may not escape its share of responsibility by imposing all the costs of cleanup on others. Allowing it to do so would interfere with CERCLA's PRP cost allocation scheme, and would implicate the same policy concerns relied upon by this court in Pinal Creek in rejecting a § 107 cost recovery action for PRPs. Id. For these reasons, we find that MERLO is preempted to the extent that it legislatively insulates Lodi from bearing its share of responsibility by imposing joint and several liability on other PRPs. 76 On the other hand, if the district court finds that Lodi is not a PRP, MERLO's liability scheme does not come into conflict with CERCLA because under CERCLA, a non-PRP may impose joint and several liability on whatever PRPs it can locate. Therefore, if Lodi proves not to be a PRP it may invoke MERLO's liability scheme without coming into conflict with CERCLA. 77