Atlantic Research Decision Authorizes CERCLA Cost Recovery for Voluntary Cleanups

June 14, 2007
by MICHAEL MELOY and JOHN GULLACE
MGKF Special Alert

On June 11, 2007, the United States Supreme Court issued a unanimous decision in United States v. Atlantic Research Corp., holding that the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), authorizes private parties to bring cost recovery actions under Section 107(a) of CERCLA to recover response costs that they have incurred even where there has been no governmental enforcement activity. The decision clears away significant confusion that has existed in the aftermath of Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), regarding the circumstances in which private parties may seek to recover response costs under CERCLA for so-called voluntary cleanups. As such, the decision has major ramifications for a broad array of persons and entities, including (1) those currently involved in cost-recovery litigation, (2) those that may have incurred costs to clean up contaminated sites without first being sued by the government or entering into judicially-approved settlements with the government, (3) those that may voluntarily incur cleanup costs in the future, and (4) those that may have liability for cleanup costs incurred by others. Past and present property owners, developers, generators of hazardous substances and transporters of hazardous substances are all likely to be affected by the decision.

CERCLA has long served as the federal statutory foundation for remediation activities involving releases of hazardous substances. Under CERCLA's statutory framework, four classes of entities (generally referred to as potentially responsible parties or "PRPs") are subject to liability for certain types of costs incurred in responding to releases or threatened releases of hazardous substances. These categories of PRPs include past and present owners and operators of property at which releases of hazardous substances have occurred, generators of hazardous substances and transporters of hazardous substances. Liability is imposed under CERCLA without regard to fault. In addition, PRPs may be subject to joint and several liability for response costs.

Since initial passage of CERCLA, the question has existed as to whether and under what circumstances one PRP may sue another PRP to recover some or all of the response costs it has incurred. While the courts generally recognized the availability of private cost-recovery actions, a number of lower court decisions during the 1990s held that when one PRP seeks to recover response costs from another PRP, such a claim is a quintessential claim for contribution and is therefore governed by Section 113 of CERCLA. In 2004, the Supreme Court ruled in Cooper Industries, Inc. v. Aviall Services, Inc. that contribution claims under Section 113 of CERCLA can only be brought in circumstances where the party seeking contribution has first been sued by the government under Section 106 or Section 107 of CERCLA. This decision, in tandem with the body of case law developed by the lower courts classifying private cost recovery claims as exclusively contribution claims, regardless of the circumstances, appeared to close the door on private cost recovery actions in most circumstances, particularly where cleanup actions had been initiated voluntarily.

With the decision in United States v. Atlantic Research Corp., the door to private cost recovery actions has now swung wide open. Justice Thomas, writing for the Court, concluded that the plain language of Section 107(a)(4)(B) of CERCLA provides for direct cost recovery claims "for costs of response incurred by any other person consistent with the national contingency plan." The Supreme Court distinguished between circumstances where a private party has incurred response costs itself—such as where the private party has engaged in cleanup actions—and circumstances where a private party has been held liable for response costs incurred by someone else. In the former situation, the Supreme Court ruled that a private party may bring a direct cost recovery claim under Section 107(a) of CERCLA while in the latter situation, the private party is relegated to bringing a contribution action under Section 113 of CERCLA. (Meaningful procedural and substantive differences between the two types of actions exist, including differing statutes of limitation, differing burdens of proof and differing remedies.) The Supreme Court did not decide whether in situations where a private party has incurred response costs but as a result of governmental compulsion (such as pursuant to a Consent Decree), the private party could bring a cost recovery action under Section 107(a) of CERCLA, a contribution claim under Section 113 of CERCLA, or both. However, it is clear that such a private party would have some type of claim for cost recovery under CERCLA.

The implications from United States v. Atlantic Research Corp. are far reaching. The interpretation of CERCLA endorsed by the Supreme Court is substantially different from the analytical framework that the lower courts have almost universally followed over the past decade, but is similar to jurisprudence that initially developed soon after CERCLA was adopted in 1980. The decision will influence transactions, risk allocation decisions, settlement negotiations, and pending and future litigation. From a public policy perspective, the decision restores incentives for private parties to conduct cleanup activities voluntarily rather than waiting to be sued by the government. These incentives were severely undercut in Cooper Industries, Inc. v. Aviall Services, Inc.

If you should have any questions regarding United States v. Atlantic Research Corp., please feel free to contact Michael Meloy (mmeloy@mgkflaw.com) at (484) 430-2303, John Gullace (jgullace@mgkflaw.com) at (484) 430-2326, or any of the other attorneys at Manko, Gold, Katcher & Fox LLP.