Third Circuit Vacates $13 Million Judgment under CERCLA for Failure to Meet Burden of Proof

May 8, 2010
Client Alert Newsletter May 2010

On April 12, 2010, the U. S. Court of Appeals for the Third Circuit decided two issues of first impression at the appellate level concerning the scope of recovery for potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), filling certain gaps left open by the U.S. Supreme Court's seminal 2007 decision in U. S. v. Atlantic Research. The opinion highlights the complexity of the interaction between the two cost recovery provisions of CERCLA -- § 107(a) and § 113(f) -- and underscores the significant ramifications that can follow from a determination as to which of the two provisions is available to a private cost recovery litigant.

The case, Agere Systems Inc. v. Advanced Environmental Technology Corp., is an appeal from a judgment entered against Carpenter Technology Corporation ("Carpenter") in the U.S. District Court for the Eastern District of Pennsylvania concerning the Boarhead Farms Superfund site (the "Site"). In that action, the District Court entered judgment against Carpenter for 80 percent of the costs incurred and to be incurred to investigate and remediate environmental contamination at the Site.

After the trial and judgment, Carpenter retained MGKF as appellate counsel. The appeal raised numerous issues, including whether the plaintiffs' claims were in part barred by the applicable statute of limitations and whether the district court improperly devised and inconsistently applied its equitable allocation. However, the appeal centered largely on the procedural circumstances in which PRP plaintiffs can successfully assert a § 107(a) cost recovery claim or a § 113(f) contribution claim. Ruling on two issues of first impression post-Atlantic Research, the Third Circuit held that: (1) a PRP that performs a cleanup pursuant to a consent decree with the U.S. Environmental Protection Agency ("EPA"), and is therefore entitled to statutory contribution protection under § 113(f)(2) of CERCLA, is limited to a contribution claim under § 113(f) and cannot also assert a claim for joint and several liability under § 107(a); and, (2) a PRP that has not been sued by or settled with EPA, but that nonetheless contributes funds toward a cleanup pursuant to a private settlement agreement with other PRPs, has "incurred" its own response costs and, thus, can assert a § 107(a) claim under Atlantic Research.

In the case before the Court, four of the five plaintiffs had been sued by EPA and agreed to perform a cleanup of the Site pursuant to consent decrees. According to the Court, those parties were therefore limited to contribution claims under § 113(f) and could not also rely upon the joint and several liability scheme under § 107(a). As a consequence of its legal determination that the consent decree signatories were limited to contribution claims under § 113(f), the Court then held that those parties bore the burden of proving each party's equitable share of liability at the Site, including their own. After analyzing the factual record before it, the Court concluded that the consent decree signatories did not meet this burden because they failed to introduce competent volumetric evidence for several parties. The Court then vacated the $13 million judgment against Carpenter and remanded the case to the district court for further proceedings. Petitions for rehearing have been filed and are currently pending before the Court of Appeals.