Opinion ID: 203380
Heading Depth: 2
Heading Rank: 4

Heading: Merits of Challenge to Court Approval of Decree

Text: Generally, two types of groups challenge CERCLA consent decrees: concerned local governments or citizens who believe that the decree is inadequate to ensure a proper cleanup, and PRPs who were not parties to the settlement and worry that they will be left to bear a disproportionate share of cleanup costs. 2 Topol & Snow, supra, § 7:92, at 185-86. Here there can be no concern that the Decree is inadequate to ensure a proper cleanup since the settling parties are together covering one hundred percent of cleanup costs. Indeed, appellants do not challenge the reasonableness of that aspect of the Decree. Rather, the appellants' primary concern appears to be that the terms of the Consent Decree will allow one of the settling parties, Citizens, (a) to assert claims against them for contribution that they believe would have been barred by the court's earlier Phase One Findings and Conclusions; (b) to have contribution protection; and (c) to pay less than its fair share. There is no real claim that the court operated under the wrong legal standard: the claim is that the court did not faithfully execute the standard. [11] Appellants present four major arguments that the entry of the Decree was in error: (a) the district court did not conduct a sufficiently rigorous inquiry of the Settlement Agreement; (b) the Decree is not substantively fair because it is impermissibly favorable to Citizens; (c) the Decree is not procedurally fair because its material terms were negotiated privately and adopted without significant scrutiny by the State; and (d) the Decree violates CERCLA section 122.
The third and fourth parties argue that the district court should have conducted a more searching inquiry of the terms of the private Settlement Agreement before it approved the Decree. They are particularly concerned with the assignment of the City's third-party claims to Citizens and the arrangement through which Citizens can keep two-thirds of any recovery from third parties net of litigation costs. The appellants' argument that the district court did not consider the terms of the Settlement Agreement is manifestly untrue. The court expressly stated that it was considering certain settlement terms from the Agreement, in particular the $7.625 million figure and the fact that Citizens might end up paying less than that amount because of its potential to recover from third parties through assignment and by contribution or benefit from federal payments. Bangor II, 2007 WL 1557426, at  nn. 5-6. The argument is made that the court was required to go farther than it did. The court quite properly considered the private Settlement Agreement to the extent it was germane to the scrutiny required of the Consent Decree. No more was needed. Private settlements usually do not entail the judicial approval and oversight involved in consent decrees. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 604 n. 7, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001). Appellants' argument then shifts in character to an argument that the court should have ruled, in the course of considering the Consent Decree, that any assignment of claims by the City in the private Settlement Agreement to Citizens was invalid. [12] The court very carefully said it was not then deciding the question of the enforceability of either these provisions or of the likelihood that Citizens would ultimately pay less than $7.625 million. Bangor II, 2007 WL 1557426, at  n. 5. The decision by the district court not to resolve every issue that could arise from the later enforcement of the Consent Decree was correct. See Charter Int'l Oil, 83 F.3d at 515-16. The district court did not abuse its discretion by not scrutinizing the purported assignment to test its validity.
To gauge procedural fairness, a court should ordinarily look to the negotiation process and attempt to gauge its candor, openness, and bargaining balance. Cannons, 899 F.2d at 86. Here, the district court concluded that as between the State, the City and Citizens, the Court is amply satisfied that the Consent Decree represents the end result of a procedurally fair, arm's-length negotiation process. Bangor II, 2007 WL 1557426, at . The court also rejected the contention of third and fourth parties that they were unfairly excluded from the settlement process. As a factual matter, the court noted that [d]espite the lack of an invitation, the status reports undoubtedly put the third and fourth parties on notice that settlement discussion were ongoing. Id. at . The EPA itself, when the United States institutes a CERCLA action, does not need to open settlement offers to all PRPs. Cannons, 899 F.2d at 93. It also does not need to spoon-feed them: In the CERCLA context, the government is under no obligation to telegraph its settlement offers, divulge its negotiating strategy in advance, or surrender the normal prerogatives of strategic flexibility which any negotiator cherishes. Id. The appellants focus here not on their exclusion from the settlement talks but rather on a series of arguments that the State's involvement was so cursory as to undermine the integrity of the procedures used. Specifically, they argue that the State was not sufficiently involved in the negotiation process, did not explain why the Decree differed from its prior administrative findings, and did not respond to the public comments it received about the Decree. The claim is not supported by the record. The district court could properly credit Maine's representations that [t]he negotiations, which occurred in late 2006 through early 2007, included numerous meetings, telephone calls, and exchanges of draft consent decrees. Both DEP and the Maine Office of the Attorney General were actively involved in the negotiations. The State authored the first draft of the Consent Decree in late 2006. Br. of Appellees State of Me. & Me. Dep't of Envtl. Prot. at 4 (citations omitted). The State also noted that the DEP will be significantly involved in the implementation of the Decree. For instance, Bangor has already submitted to the DEP a work plan for conducting pre-design studies, and the Decree includes a process for the proposal and consideration of modified remedies for the Site, under which the DEP will make determinations regarding which remedies or modified remedies will be implemented. Further, [g]iven that the Consent Decree will result in the cleanup being performed and fully funded by responsible parties, the State's release of its present and future claims against Citizens is in no way an abdication of the State's responsibility to protect the public interest. Id. at 23. Rather than address these facts, appellants try to leapfrog to an inference of procedural unfairness from a conclusion the State reached that they do not like. They argue the extent of the State's abdication of responsibility is apparent from its statement that it had no obligation to look behind the combined financial commitment of the settling parties to fund the remediation. Br. of Appellants Barrett Paving Materials, Inc. et. al. at 55. This is essentially the same argument that the third and fourth parties make with respect to the district court: that the court should not have approved the Decree because Citizens was getting too beneficial a deal vis-à-vis Bangor. Maine's failure to address this concern does not turn the State into a mere bystander to negotiations of the substantive settlement terms. Id. Appellants fall back on an argument that the State's signing onto the Consent Decree was deficient because it was inconsistent with the State's prior position that Citizens was the party responsible for the contamination. But, as the State notes, the June 2006 Phase One Findings and Conclusions were an intervening event between the DEP's March 2004 statement that evidence points to the MGP as the primary or sole source of the tar plume and its participation in drafting the Consent Decree. There was no inconsistency. Appellants' last argument of procedural unfairness also fails. It asserts that the State did not respond to public comments regarding the Decree, and that this violated CERCLA section 122, 42 U.S.C. § 9622(d)(2)(B). Section 9622(d)(2)(B) does not apply to agreements to which the United States is not a party. Even if it did apply, it provides for comments by persons who are not named as parties to the action. Id. The two comments received in this case were from third- and fourth-party defendants. Appellants can hardly claim they were not adequately heard. The district court did not abuse its discretion by finding the Decree to be procedurally fair.
We give deference to the trial judge's sense of the substantive fairness of the Decree, regardless of the fact that we do not have the EPA's assessment, but only the State's. Cf. Davis, 261 F.3d at 24. Usually, there is deference to the EPA's judgment on fairness, and no independent court inquiry. 2 Topol & Snow, supra, § 7:91, at 173-75. Here, the court appropriately first reasoned, after its long history with the case, that it was amply satisfied that there was procedural fairness, that this contributed to its conclusion of substantive fairness, and that this Decree was substantively fair. Bangor II, 2007 WL 1557426, at -7. The court calibrated the estimated total costs of the cleanup against the respective monetary liability being assumed by the City and Citizens. The court took notice that the DEP had previously estimated the range of possible cleanup costs to be between $13.2 million and $21.9 million. Id. at  n. 11. The court noted that since the total costs of remediation were unknown, and the amount of contribution was unknown, both the City and Citizens were taking on risk. The cleanup, however, was guaranteed, as was the payment of response costs. Id. at . Appellants argue that the court was obligated to do more. Specifically, they argue the fairness component is meant to provide them rigorous protection in the end from paying more than their fair share. From the point of view of the third and fourth parties, Citizens should not, with the total amount being unknown, be able to cap its liability at $7.625 million. We think this is a misapprehension of the fairness doctrine. The oft-cited language from cases where the United States is a party is that the substantive fairness inquiry involves corrective justice and accountability, concentrating on `the proposed allocation of responsibility as between settling and non-settling PRPs.' Davis, 261 F.3d at 24 (quoting Charles George Trucking, 34 F.3d at 1088). Thus, the substantive fairness inquiry considers fairness in terms of both larger societal concepts such as corrective justice and fairness to non-settling parties. Under SARA, Congress intended there to be some mechanism to police the EPA's conduct in settlements. Congress enacted SARA in 1986 in order to rein-in the EPA; for instance, section 122 contains detailed provisions that restrict EPA's freedom to conduct negotiations and to enter into CERCLA settlement agreements. 1 Topol & Snow, supra, § 1:3, at 14, 16; see also Cannons, 899 F.2d at 89 (acknowledging the possibility of coercive government settlement practices). That concern about overseeing whether the EPA has been fair is not our concern here. Further, this court has tended to treat private parties in CERCLA settlement cases as entities who can protect themselves, assuming the procedures are fair. This circuit has stressed that [t]here is little need for a court to police the substantive fairness of a settlement as among settling parties of a particular class. Sophisticated actors know how to protect their own interests, and they are well equipped to evaluate risks and rewards. Charles George Trucking, 34 F.3d at 1088. Therefore, a court can usually confine its inquiry to the substantive fairness of the aggregate class contribution, or, put another way, to the proposed allocation of responsibility as between settling and non-settling parties. Id. As a result, it would have served no useful purpose [for the district court] to go further and focus the lens of inquiry on the fairness of each class member's contribution. Id. Settlements do not demand perfection. There are many factors involved. [A] PRP's assumption of open-ended risks may merit a discount on comparative fault, while obtaining a complete release from uncertain future liability may call for a premium. Cannons, 899 F.2d at 88. Even more, this case exemplifies the principle that there is a need to suitably reward early settlements, particularly cost-effective ones. Id. Appellants have been excused from the costs of the Phase One litigation; they could have chosen to pursue settlement themselves, but chose not to do so. Here, the data used to apportion liability fell within the broad spectrum of plausible appropriations. Id. The district court's evaluation of substantive fairness was well within its discretion and this circuit's case law.
The district court did not abuse its discretion in concluding the Consent Decree complied with CERCLA. The appellants claim that the Decree violates CERCLA because it does not comply with 42 U.S.C. § 9622(f)(6)(A), which requires that a covenant not to sue include an exception allowing the President to sue for future liability that arises out of new developments, because it provides for an unconditional release of future liability for Citizens. The parties dispute whether the third and fourth parties waived this argument by not sufficiently presenting it below. Regardless of whether it was waived, the argument fails. Section 122 of CERCLA plainly applies to settlements involving the United States, and the third and fourth parties have presented no convincing argument why we should disregard the clear language of the statute and extend it to settlements involving states and state agencies. See Arizona v. Components Inc., 66 F.3d 213, 217 (9th Cir.1995) (noting that provisions of section 122 are not applicable to state settlements in which the EPA is not involved). The purpose of CERCLA section 122 is both to authorize the President to enter into agreements with persons to perform response actions and to impose specific restrictions on his doing so. There is no evidence that Congress intended for states to be similarly restricted in entering into consent decrees. [13] Even so, the Consent Decree here does give parallel protection to the State. If there are new problems at the Site in the future, Maine is entitled to seek additional costs from the City if necessary.